Saturday, September 11, 2010

How much house should you buy?

If you are buying or selling property, you likely fit into one of three categories.
Either you are:
 1)  buying a home and selling a home
2)  selling a home but not buying another
3) buying a new home without a current home to sell (previously renting)

Folks in the first category come out okay whether it is a seller's market or a buyer's market because the price differentials offset one another. I.e. they will get less money for their home than they would have a few years ago, but they will also pay proportionally less for their new home.

People in the second category suffer in a buyer's market because there is no off-setting purchase. They simply "lost" equity they would have gained if they had sold during the previous seller's market.

The current buyers' market is most favorable for the folks in category three because they reap the benefits of buying when prices are low and inventory is high, without having to sell a home that used to be worth more.

So what if you are one of the lucky category-three-first-time buyers? What can you do to take the greatest advantage of the current conditions in the real estate market?

I NEVER encourage anyone to buy more house than they can afford, even if a lender tells them they qualify for a larger loan. It's no fun to be "house poor" and unable to enjoy life's other little pleasures. However, in consultation with your lender and/or financial planner, if you consider your home to be an investment, I do suggest you consider buying as much house as you can reasonably afford. Why? Because when prices go back up, you will have gained as much added equity as possible.

Want to know more? Give me a call at 206-708-9800 to set up a free, no-pressure, no-obligation consultation.

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