Is now the right time to move up into a new home? It’s a tough question for sure and one that really depends on your situation, both personal and financial. With any major decision it is best to start by asking yourself a few basic questions. Do you need a new home? Would you prefer a different area or a particular school district? Is your family growing? Are you in need of more space? By jotting down your answers to these questions, you will begin to figure out if a move makes sense for you personally. The next step then is to take a look at your financial picture.
Once some of the personal questions have been answered, it is time to look at the numbers. True, it has been no picnic out there in the real estate and credit markets over the past eighteen months, and all the attention has fueled the rumor mill. However, the real question remains rather simple. With home values depressed is now the time to make a move? I have heard over and over “…my home has lost value and I may even need to bring a few thousand dollars to the table in order to sell…” I agree bringing money to the table is a tough pill to swallow, but that is only half of the financial picture.
For the sake of argument and to help simplify things a bit, let’s assume the area in question has seen home values decline about 10%. You decide to sell your home and instead of getting $250,000, you sell it for $225,000. Painful, yes indeed, but now the fun part. You purchase your next home and instead of paying $450,000, you get it for 10% less, or $405,000. Wow! You actually saved money. Combining the two transactions, you have saved $20,000 dollars! Not to mention with the current tax credit in place, you may qualify for an additional $6,500. All this while mortgage rates remain around their historic lows.
Let’s be honest with ourselves, there are certain factors that need to go your way in the above scenario. But the truth is savings are out there for the move-up buyer not just from the tax credits, but through good old fashioned number crunching. All that being said, the importance of answering the personal questions first cannot be understated. Happiness and success in owning a home is the combination of reaching personal goals first and then backing them with sound finances and savvy purchases.