The pandemic has lead to record low interest rates, a workforce migration, and a housing shortage. Combined, these factors have created a bottleneck in competition for real estate. While the market has taken off, it’s important to remember the reason we buy real estate, but also how to properly buy it. After all, the goal is not simply to buy real estate, but to actually own it!
San Diego real estate is expensive. We tend to pay a substantial amount of our take home pay on housing. Ensuring that you can afford your monthly mortgage payment, in addition to the insurance, taxes, and any HOA payments, will make owning real estate a little more palatable. If at all possible, we don’t want our housing payment to be a burden.
Having a decent down payment can be a challenge, but the larger the down payment, the lower the monthly mortgage payment. A larger down payment, ideally 20%, will also eliminate mortgage insurance, or at the very least reduce it. 20% down will also eliminate the need for a second mortgage as well.
Reducing one’s debt prior to purchasing a home will free up money to go towards a mortgage payment. It will also improve one’s debt to income ratio, thus increasing buying power. Lenders only allow for a certain amount of one’s income to go towards their bills.
Creating a cushion for a rainy day is an important part of preparing for homeownership. There always tends to be unforeseen expenses that present themselves when owning a home. We never know when a water heater will fail, an appliance needs replacement, etc. Be prepared with money set aside for these surprises.
Lastly, with interest rates this low, we should really consider taking advantage of 15 year mortgages or 20 year mortgages. A 30 year fixed, long the standard, is expensive. The amount of money that we pay towards interest can be reduced dramatically when shortening the mortgage term. The goal of buying a home is to own it, so shortening the mortgage terms helps you get to ownership sooner! Who wouldn’t love a life a without a mortgage payment?
Reach out to Market Real Estate to discuss your homeownership goals. Let us help you!