4 things to consider before buying a home in Phoenix
Buying a home is a serious commitment and a decision not to be made lightly. Rampant foreclosures nationally, with a record-breaking rate here in the Valley, have contributed to more Americans renting rather than taking on the responsibilities of being a homeowner. Aspirations of the warm and fuzzy, 1950’s “American Dream” of owning your own home with a white picket fence, and having 2.5 children are pretty much passé these days; and this may not be a bad thing.
Phoenix became a boomtown for investors and honestly, anyone with a pulse to buy a home as home values skyrocketed at a seemingly infinite rate in the early 2000’s. Homeownership became a matter of financial investment rather than a fulfillment of an emotional lifetime goal. Particularly here in the Phoenix-Metro area, it was possible to purchase a home with absolutely no money out of pocket. Renting became viewed as an absurd waste of money with headlines questioning, “why pay your landlord when you can invest in your retirement”. If you bought a home in 2004, that home is now likely worth less than half of what you paid for it. Ouch.
It is true that home prices are very affordable here in Phoenix, but is it really a good idea to be house hunting right now? Here are a few things to consider before calling up a Realtor:
Can you commit to living in the same home for years to come?
It is true that our market is flooded with fantastic deals on homes all around the Valley. Before you buy you’ve got to ask yourself if you can commit to living in that home, area, and neighborhood for what is projected to be about ten years before you are able to recoup the cost of purchasing the home? Long gone are the days of flipping properties for a quick profit. Home values will be rising much more slowly and buying a home comes with a lot of upfront costs.
Before looking to buy a place, you’ll need to know that you can honestly say that you see yourself living there for the next decade. If you plan on having kids in the coming years, do you like the schools in your school district, or will you be forced to move when the time comes? Is your income stable enough to make your mortgage payments in case you go a few months without a roommate or lose your job for a period of time?
Is your credit picture perfect?
New lending standards to be approved for a mortgage on that new house are incredibly stringent these days. You’ll need to have a solid job history, excellent credit, and plenty of savings in the bank. Lenders are much more weary about approving home loans with so many homes facing foreclosure over the past few years. A collection for just $30 in the past three years can blow your chances of financing a home. So not only do you have a credit score above 700, but is that credit history flawless as well?
Are you ready to pay 3.5% to 20% right up front?
Along with tougher standards to be approved for a home loan, banks are requiring larger down payments. An FHA loan requires 3.5%, but you have to qualify under more difficult minimum standards. Most conventional loans require a minimum of 10%. Do the math; this can be quite a chunk of change to throw into a home all at once.
Can you undertake the responsibility of unexpected extra expenses?
Forget a maintenance department to come by and fix your air conditioner within a few hours, or to pop in while you’re at work to fix that leaky sink. As a homeowner you’ll be responsible for making those necessary fixes on your own. This means having extra money on standby just in case. What would you do if your air conditioner broke mid-August? Could you fork out the dough to make your home livable right away?
Not to mention other added expenses like, monthly HOA fees, all utilities, home owners insurance, countless other maintenance expenses. Is that monthly payment still affordable now?
Renting these days offers much greater flexibility and far less responsibility than owning a home. Leaving the risks and expenses of owning your residence or managing your apartment, sounds pretty attractive especially in Phoenix’s real estate market.