• Do you have a home to sell first?  Generally, it is always best to sell your existing home first, or at least have a good solid contract on it before looking to purchase your next home.  In the days of the “hot” real estate markets, one could expect a quick sale on their existing home.  Unfortunately, I’ve seen buyers in the past couple of years put money down on a new home to be built to their specifications, only to lose that deposit when their current home didn’t sell.  Despite the hassles of a “double move”, it’s better to be in a rental for a few months than risk losing a large deposit.
• Are you moving locally, or are you moving to Prescott from another part of the country?  If you’re moving locally, then everything is relative.  If you’re forced to sell your current home at a bargain price, then rest assured you can purchase your new home at a bargain price.  In a down market, the move-up buyer does a little better to make the jump now rather than after the market heads upward because his mortgage on his new home will be lower and require less down payment than when the housing market is appreciating..
• How much will your down payment be and what is your credit score?  Many first time homebuyers got into trouble in the days of the “hot” markets by purchasing a home with 100% financing.  Now it is very difficult to find a lender willing to do 100% financing, although FHA has a program now for that.  Also here in Prescott, we have a loan program that gives down payment assistance.  However, I would not recommend getting 100% financing unless you are absolutely certain you will stay in the home long enough to build some equity.  No one can say with absolute certainty when houses will once again start to appreciate.  Therefore, first time homebuyers are probably best served by building a good credit score (to ensure eligibility for a loan at a good rate) and saving some money for a down payment and closing costs.  The standard FHA loan requires 3% down, and that is a good figure to shoot for when saving for that first home. In lieu of that, responsible homebuyers needing 100% financing should plan on staying in the home several years (5 years minimum).
• How long are you planning on staying in your home? This answer goes along with the last question.  In a slow market, you need to be committed to staying in your home a minimum of 3 to 5 years in order to recoup your initial investment, avoid capital gains tax, and have enough equity to cover your selling costs and give you a substantial down payment on your next home.
• The unknown – what will interest rates be a year from now? Of course no one knows, although many “experts” are saying that mortgage rates will increase.  Along with housing prices, the mortgage rates bear watching just as closely.  An increase in mortgage rates could result in the same monthly payment on a house that’s priced 10% less next year, in which case, a person could have been enjoying their new house for a whole year at the same monthly payment as next year’s bargain.
• Do you itemize deductions on your tax return?  There are definite tax benefits to home ownership.  You do not get these tax breaks when you rent.
• Do you enjoy renting? This is one of those intrinsic things that is probably one of the biggest in making the decision whether or not to buy now.  If you’re content to be a renter and don’t need a space to call your own, then you may benefit by waiting a while longer to jump into the market.  On the other hand, if you really hate living in a rental, then finding a well-priced home now will bring you an extra year of living in a home you truly enjoy.

I hope these points have given you some “food for thought”.  If you would like to explore your housing options and discuss whether or not this might be the right time for you to consider buying in the Prescott area, please give me a call or email me at Gretchen@MyPrescottHome.com.  My clients are my priority, and I want you to make an informed decision that’s right for you!