7 Important Aspects To Consider Before Entering The Housing Market

Assuming you've sorted out your finances, the next thing to think about is housing market economics, either in your current location or in the one where you want to relocate. A house is a significant financial investment. Having the funds to make the buy is great, but it doesn't tell you whether or not the transaction is financially sound.

One of the ways to determine the financial soundness of a mortgage decision is to ask yourself if Is it cheaper to rent than to buy. If buying is less expensive than renting, there is a compelling argument in favour of buying.

In the same way, it's important to consider the long-term effects of a property purchase. Buying a property used to be practically a sure method to make money for decades. Your grandfather could have bought a house for $20,000 50 years ago and sold it 30 years later for five or ten times the price. While real estate has long been thought to be a safe long-term investment, recessions and other disasters can put that idea to the test—and make would-be homeowners reconsider their decision.

When the real estate market plummeted in 2007, many homeowners lost money and ended up owning homes for several years that were worth significantly less than the amount at which they were purchased. If you're buying a home with the expectation of it appreciating over time, make sure to account for the cost of your mortgage interest payments, property enhancements, and continuing or routine maintenance in your calculations.

Similarly, there are years when real estate values are low and years when they are quite high. If prices are so cheap that it's clear you're receiving a good bargain, it's a positive sign it's time to buy. In a buyer's market, low prices improve the chances that time will work in your favour and your home will appreciate in the future. If history repeats itself, the COVID-19 epidemic and its devastating economic impact, for example, may result in a reduction in housing prices.

Interest rates, which determine the size of a monthly mortgage payment, have high and low years, which is better. A $100,000 loan over 30 years (360 months) at 3% interest would cost $422 per month. It will cost you $537 per month if you borrow it at 5% interest. It rises to $665 if you add 7%. As a result, if interest rates are lowering, it might be a good idea to hold off on purchasing. It makes sense to buy sooner rather than later if they are rising.

Seasons play a role in making decisions. If you want to see as many homes as possible, spring is usually the greatest season to go house hunting. Part of the reason has to do with the target audience for most homes: families who are waiting for their children to finish the current school year before moving but want to settle in before the new school year begins in the fall.

Winter or the height of summer may be preferable times to look for a home because there will be less traffic, which may allow sellers to be more flexible on pricing. However, some astute buyers like to make bids during holidays like Christmas or Easter, expecting that the unusual timing, lack of competition, and overall spirit of the season will result in a quick purchase at a fair price.

While money is a big aspect, there are a lot of other things that can influence when you should do anything. Is a new baby on the way, or an ageing relative who can't live alone, causing you to need more space? Is your child transferring schools as a result of the move? Is it worth delaying to avoid capital gains tax if you're selling a home you've only lived in for two years?

If you're selling a property and planning to buy another, but the earnings into a savings account and figure out if you'll be able to afford the mortgage after subtracting other required expenses such as car payments and health insurance. It's also worth noting that more money will be set aside for maintenance and utilities. Larger residences will almost certainly incur more costs.

The first thing you should look for in a home is affordability, but you should also consider how long you plan to stay. Otherwise, you risk becoming trapped in a home you can't afford in a city or town you want to leave. As a rule of thumb, many financial gurus recommend staying in a house for five years before selling it. Remember to account for the costs of purchasing, selling, and relocating. Consider the mortgage fees linked with the home you're selling's the breakeven point. It may not be the ideal time to buy if you can't decide where you want to live and what your five-year goal is.

To determine how much house you can afford to buy, you should look at your income, savings (for a down payment and closing expenses), and recurrent debt. The 43 per cent debt-to-income (DTI) ratio is a solid benchmark for getting a mortgage loan approved and affordable.

Are you prepared to purchase a property? In a nutshell, yes—as long as you have the financial means to do so. However, "affordability" isn't as straightforward as the amount of money in your bank account. You should factor in a variety of other financial and lifestyle factors as well.

When all of these factors are considered,  it becomes clear that the situation is more complicated than it appears. However, thinking about money before you buy can help you avoid costly mistakes and financial troubles later on.