How Long Should You Rent Before You Buy A House?

There are many consideration to make before your should decide to buy a home. A home is an expensive purchase and thus, absent you having a large cash reserve, you are going to have to borrow the money to purchase your home. As such, you are going to have to consider your credit score, your monthly income, your monthly obligations, and the price range of homes that are within your economic range, to name a few. Additionally, depending on the current economic condition, your interest rate for your mortgage is another consideration. You also have to consider you job situation and whether it is likely you will move out of your current city or state. This consideration is important because if you need to sell you home in order to be able to afford to move, the status of the real estate market is going to dictate how quickly you can move.

If you discover that you cannot currently afford to buy a home, your alternative is to rent for the time being. This does not mean that you will never be able to buy a home. Renting for now simply means that due to your current financial or credit situation, you will have to refrain from purchasing a home. If this is your current situation, you may be wondering how long you have to wait until you can buy a home.

The answer to this inquiry depends on all of the factors discussed in the first paragraph. If you can financially afford to buy a home, have the credit in order to qualify for and obtain a loan (should you need a loan), and do not plan on making any long distance moves at any time in the near future, you should be in a position to buy a home. However, even if you are in position to buy a home, depending on where you live, there may not be any homes available for you to buy.

There are many cities and towns that are not expanding or have no room to expand, and as such, the total number of homes in that area remains constant. As such, you may have to wait for an opening or may have to look for a home in another location. Therefore, even though you are ready, willing, and able to purchase a home, the current real estate market may not allow you to do so.

If you can financially afford to do so, you should consider purchasing a home. Even though overcoming the financial and credit obstacles are the hardest burdens to overcome when purchasing a home, the current real estate market may be a factor that prevents your purchase of the same. If this occurs, be patient and maintain your financial and credit situation so that when a home becomes available, you will be able to purchase the same.

Is the Mortgage Crunch Really a Bad Thing?

In my previous post Multiple Streams of Income: Real Estate as a Business, I discussed the real estate business as a potentially lucrative business for new entrepreneurs. Well, I am here to tell you that the time to strike is now.

News broke yesterday that the tenth largest mortgage lender, American Home Mortgage, filed for Chapter 11 bankruptcy. This fueled speculation that the mortgage market was in heavy turmoil. This is due to the fact that American Home Mortgage was not a sub-prime lender and because some of the company’s investors included some of the largest financial firms in the world.

However, even if this is true, real estate investors can still benefit from this kind of market. The current situation is that people cannot obtain mortgages. These people are not necessarily financially inept, but these people do have a problem (whether is be substandard credit or lack of a down payment) that prevents them from obtaining a mortgage and thus, owning a house. These people have two choices: they can either leave their current location, move to place where the cost of living is less, and attempt to buy a house at this new location; or these people can rent a home, condo, apartment, etc., until they can afford to buy. Due to considerations such as employment, family, friends, etc., most people choose the latter option.

How does this help real estate investors? If, as a real estate investor, you practice the Buy, Improve, Hold, and Refinance model, this current market is great news for you. As more and more people are unable to obtain mortgages, more and more people will be looking to rent. If you are the owner of an investment property, you should have no problem filling any vacancies, and because of the large influx of renters, you should also have no problem getting a premium rental rate.

What if you do not have an investment property? The good news is that you are not out of luck; the bad news is you will have to have great credit and probably a small down payment, but more of this in a minute. Another effect of this market is that people are having trouble selling their homes. Less people qualifying for mortgages equals less buyers. If we all remember back to Economics 101, we will know that the economy revolves around the principle of supply and demand. Right now, there is a far greater supply of homes than there is a demand. This means that you, as a real estate investor, can grab a property for less that its fair market value (if you have the right credentials a.k.a. good credit and a down payment).

Although the market looks bleak for some, the market looks great for real estate investors. Strike while the iron is hot and find a good investment property today!