By: Suzie Wilson
Regardless if it’s your first or nth time buying a house, one thing remains the same, and that is you need to get the most bang for your buck. After all, you want to make sure that your property is exactly what your family needs or what potential renters want. However, an economic downturn can throw curveballs on what should be a straightforward enough transaction. Consider the following steps, brought to you by Best Home Magazine, to ensure that, recession or otherwise, your home purchase is a breeze.
Determine what you can afford.
When you’re on the market for a home, you likely already know that you can afford it. Exactly how much you can afford is another story. As a rule, CNBC notes you should keep the 30/30/3 rule in mind to determine affordability. For starters, your monthly mortgage payments should be, at maximum, 30 percent of your income. This is especially important in a recession when mortgage rates are lower and the temptation to spend more is real.
Next, it’s smart to have 30 percent of the property value saved up in cash. This is because you need to pay a downpayment to get the best possible mortgage rate, as well as a handful of other fees. Note that investment properties generally require higher down payments than properties that you, the owner, will occupy. This can be as much as 15 to 25 percent on an investment property loan—a far cry from the 3.5 percent required for a primary home on an FHA loan.
Finally, it’s smart to keep your home purchase at no more than three times your annual income. To simplify the math further, make use of an online mortgage calculator to give you a clearer picture.
Make location a priority.
For most real estate experts, location is the most important factor in choosing property. If it’s a home for you and your family, you will definitely want it to be in a safe neighborhood, as well as close to schools, the office, and myriad conveniences. If it’s a rental property, most of the same will attract potential renters.
Home prices do vary from area to area. It’s a good idea to keep an eye on the current home prices of the housing market you prefer. Researching home prices online will, in fact, give you a better idea of what you can afford while also eliminating much of the legwork, so you can narrow down your options.
Work with a realtor.
Whether you’re an old hand at property investment or a first-time buyer, know that you are infinitely better served when you work with real estate professionals. They can provide much-needed guidance from start to finish. And they’re an absolute must if you’re planning on buying a distressed, foreclosed, or as-is property to flip or as a rental property. They’ll help you negotiate the best starting price so that you have plenty to invest in the necessary fixes for the home. You not only avoid buyer’s remorse, but your home-buying experience will be a positive one.
In essence, buying property in a recession is not that much different from buying at any other time. But it’s also likely that you will have to take extra care and additional steps to protect your investment. Ultimately, it’s this care that will ensure the best possible purchase.