With home prices tempting buyers, is now the time to jump into the market? A would-be homeowner seeks advice from Walt Romatowski, a certified financial planner and owner of Castellan Financial Advisors in Roseville, Calif.
Question: I am starting a new job in several weeks. I intend to buy a house as soon as possible, but my new job has a probation period that could last up to two years. I want to take advantage of the housing market and get a nice home.
My fear is that if I lose my job, I’ll be stuck: unable to sell and unable to make (my house) payments. Would it be wise to buy now with a small down payment, or to pass the probationary period and risk prices going up and a larger down payment?
Answer: Given the fragile state of the economy, it’s unlikely that home prices will be rising dramatically any time soon (ditto for mortgage interest rates), so don’t be in a big hurry to make such a large financial commitment.
You should wait until you have a better understanding of your new job responsibilities, how you fit within the organization and the financial health of your new company.
Waiting to buy a new home has the following advantages:
• You are more likely to perform better on your new job if you are not stressed out about buying a home. Demonstrating your capabilities early to your new employer may eliminate or reduce the probation period.
• Longer work history makes the mortgage company more likely to loan you money.
• You can build a stronger credit history, which may provide a lower mortgage interest rate.
• You will be able to save more for the down payment, which will reduce your mortgage payments and possibly eliminate the need for private mortgage insurance, or PMI. Generally, you must pay for PMI if your down payment is less than 20 percent.
I’d suggest that you make a budget and try to save as much as you can. Obtain your credit report to see if there are any errors or issues you need to work on.
And lastly, if you haven’t owned a home before, familiarize yourself with other costs that come with home ownership: property taxes, insurance, maintenance, landscaping and general upkeep.