If you have plans to buy a home at the beach, in the mountains or in the desert for your retirement years, you might be tempted to take the plunge and buy your future home now while interest rates and home prices are low.
Financial experts say However, people in this 
age group should be aware of the risks of tying up money and perhaps losing flexibility with a second home purchase.
While there’s no denying that we are in experiencing historically low interest rates and low home values right now, anyone considering buying a second home before they retire needs to run the numbers. People get stars in their eyes sometimes at the prospect of retirement, but the reality is, they may not be able to afford to buy another home right now.
Future retirees are better off maxing out their 401(k)s and make sure they have adequately insured their future before thinking about buying retirement homes.
Financing another home before retirement
For 50- and 60-somethings with plenty of discretionary income, buying a home with cash is an option. Others need financing.
There are three basic options for financing a home.
The home can be financed as an owner-occupied home if the buyer lives in it as a primary residence, as a second home or as an investment.
Second-home financing means you will need to qualify to pay the mortgage on both your current home and your second home. If you need some additional income to qualify for the loan, you can rent the property, and a lender may use some of your rental income for a loan approval.
Some lenders suggest that financing a property as a second home rather than as an investment property is the better option because interest rates, qualification guidelines and down payment requirements are generally more lenient on second homes than on investments. An investment loan always requires a down payment of at least 20 percent or 25 percent.
People getting ready to retire might want to consider the benefit of buying homes before they stop working because a mortgage approval could be more difficult to obtain without an income.
Most financial planners will tell potential retirees that buying a second home is not for people who are just getting by. This should only be a choice for people with the income and assets to handle it.
Anyone who has ever bought a home will tell you, emotion plays a big role in the decision. However, if you don’t approach the home buying process logically, you could end up making some major mistakes.
Probably the biggest area most Dana Point home buyers make mistakes with is when it comes to choosing the right mortgage.
The first thing you must do is get a good mortgage broker. There are many lenders available for a mortgage if you have decent credit, and it can be very confusing if you are going it alone. A mortgage broker has experience and connections to find you the very best rate available. The value of the home you are purchasing is only part of the cost, and even a small difference in mortgage rates can make a huge difference in savings.
Get pre-qualified for your home loan. There’s nothing worse than finding your dream house, only to realize you can’t afford it. Before you look for a house, get pre-qualified, or better yet, get pre-approved. Have all the pertinent information, such as, employment history, credit history and outstanding debts available, because your mortgage broker is going to need them. The best mortgage lender will then be able to tell you exactly how much you will qualify for.
Keep an eye on the economic market. Buying a home when the market is lean like it is now is a very smart move, if you can afford it. Home values rise and fall with the economy, so if you buy a home when the economy is low, chances are very good the home will increase in value and you’ll realize that appreciation later on.
There are many more important home buying tips, and we have them on this site. Just click the home buying tips link under our categories section to find more important home buying tips.
An issue of Consumer Reports® has a relevant investigation of defects in homes. Importantly, the article gives excellent advice regarding how home buyers can take steps to avoid trouble.
The Consumer Reports® article states “Be proactive. Consumers should never buy a house without first hiring a real-estate attorney and a home-inspection engineer.”
It is important for home buyers to understand that the credentials of home inspectors vary widely, some are licensed engineers, some are non-engineers, some claim to be professional home inspectors, some claim to be certified, some claim membership in a home inspector group. Some certifications can be obtained by almost anybody, a high school diploma is not a requirement and certifications can even be obtained by joining a trade group.
The Consumer Reports® article states “Hire a qualified home inspector. Preferably, the inspector should be an engineer or architect.”
If you have questions about why you should hire a qualified home inspector, contact us. We’ll provide you with complete details.
Selling a house in this economy has its challenges. A seller must make a careful assessment of the pros and cons of their property before they put in on the market. One question that must be answered right from the start is establishing whether now is the best time of the year to sell.
Generally, fall and winter are not the best time to sell a home, but due to the increase of foreclosures and short sales, there is an abundance of available homes to choose from, but with many of these properties it is truly buyer beware. The market is plagued with potential hazards for the unsuspecting buyer. Many homes for sale have not been properly processed in the foreclosure process so a new buyer may find themselves in a legal maze where they could lose money. It is up to their real estate agent to inform them of the obstacles.
Interest rates are at all time lows, making now an attractive time for anyone who’s been sitting on the sidelines to jump in, meaning if you’re thinking of selling a home, now could be a great time to take advantage of record low interest rates.
Forecasts of possible further declines in housing prices may or may not happen, but if your home is in good selling condition, you may have an advantage over all the foreclosures and short sales that are flooding the market, simply because of the high risk a buyer must take when buying these properties.
If you need to sell a home, consider the condition of your home, and what you will be competing with in your neighborhood. It may just be the best time ever to sell your home.
Despite the recession and declines in home prices, Americans still view homeownership as being important to the economy and the American family, according to the “Housing 360 Survey” conducted among more than 3,005 homeowners and renters across the U.S.
“We thought people would be soured after watching home values fall but instead we found the typical American still places high value on homeownership,” said Frank Anton, CEO of Hanley Wood, LLC, the nation’s premier media and data research company serving the housing and construction industries. “We found this holds across all demographic groups and across the country, even in hard-hit places like Nevada and Arizona where there have been 50 percent or more declines in value. The increase in the rise of rental rates in many markets is one factor driving people to consider buying.”
The survey found that despite the recession and housing crisis, homeownership is still very important—that both renters and homeowners feel it is a good time to buy a home and 19 percent of homeowners and 29 percent of renters are considering buying a home in the next two years. In fact, the survey findings support that up to two million potential home buying consumers are waiting to jump into the market when the time is right.
The “Housing 360 Survey” answers why renters and homeowners are not buying. For homeowners, there is no urgency to buy, and given the turmoil in the markets, many of them are happy where they are. For renters, there is also no urgency to purchase a home. There are major problems they are facing: First, they have the challenges of being able to qualify for a mortgage and raise the down payment. And second, they have concerns about the economy and their jobs.
The survey covers 70 questions relating to Americans’ decision-making process and attitudes on homeownership, renting, remodeling, financing, home buying, gasoline prices, household relationships, and retirement planning. Sixty two percent of respondents were first-time homeowners. The survey found 89 percent of owners and 59 percent of renters feel that homeownership is important to the American family while 87 percent of owners and 73 percent of renters feel homeownership is important to the economy overall.
Some significant findings in the survey include:
- Now is a good time to buy. 72 percent of owners and 59 percent of renters think now is a good or very good time to buy.
- New and existing homes both attractive. 29 percent of owners and 12 percent of renters would prefer to buy a new home. 34 percent of owners and 41 percent of renters would prefer to buy an existing home. People prefer new homes because they are new and there is less maintenance. They prefer existing homes because they are more affordable and they want to live in an existing community.
- Renting is a preferred choice for many. People rent for financial reasons, for convenience and for flexibility.
- Doubling up trends increased. 30 percent of respondents are “doubling up” – living with adult children or parents.
- Now is a good time to remodel. 42 percent of owners say now is a good time to remodel. Top remodeling priorities are maintenance and energy efficiency. Most homeowners will pay for remodeling from personal savings.
- Staying put in retirement. 60 percent of homeowners plan to stay in their current home for their entire retirement.
All data is courtesy of the “Hanley Wood Housing 360 Survey”.
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