This question needs no introduction. Let’s dive right in. This video shares my very honest thoughts on whether it’s a good time to buy a home. I also share some timeless advice. Enjoy!

Transcript:

We are living through a really interesting time in real estate, and everyone’s asking if it’s a good time to buy a house. There’s a lot going on with high interest rates and low inventory, and a lot of other factors that affect the housing market, and you’ll get differing opinions about whether it’s a good time to buy, based on who you ask. Economists think we’re headed for a recession and housing downturn in some markets but agents are seeing prices continue to rise so they’re encouraging people to buy now. So who do you turn to?

As a financial coach, real estate agent, and mortgage loan officer, I’m asked every day, should I try to buy right now? And I want to give you the advice that I give my clients, my clients who I treat like my closest friends. Here’s the most straight-forward, honest truth that I share with them. No one can tell you for sure that it’s a good time or bad time to buy because no one can predict the future with any certainty. I actually don’t think that this is the question to be asking. Sure, it’s a lot of fun, for some of us, to get into the nitty gritty of the numbers and guess where we’re going to go, but it doesn’t actually serve you, the potential home buyer, to get caught up in the debate. I don’t think it’s worth having this debate because you can find very intelligent, informed, and reasonable people on either side of the argument.

Personally, I don’t like making decisions based on external factors, like the market, I like to make big decisions like this based on looking inward at myself and the things I can control. So think of it this way: If you are interested in even the possibility of purchasing a home, ask yourself: how can I make myself the strongest home buyer I can be? You can’t control the market, but to a significant degree, you can control your own finances. Make yourself a strong home buyer as soon as you can, not only because that will help you get the lowest monthly payment for the most house you can afford, but also because doing that will help you get very clear on the property you’re looking for. As a strong buyer who is crystal clear on what they’re looking for in a home, you and your agent will be perfectly positioned to help you spot a deal that’s perfect for you.

Great opportunities always exist, no matter the market, but you can only recognize it and capitalize on it when you’re in a position to buy at a moment’s notice, and you can assess that a particular property is perfect for you. Preparation is paramount. And preparation takes time. I think you’d be shocked at the number of people who don’t give themselves the time and attention to position themselves as strong buyers. So many people just decide, OK, I’m buying a house now, and they just dive in headfirst, without knowing that they’re even a decent swimmer. Then they get themselves emotionally attached to a property and deal with very expensive consequences for years and years for following their heart. I don’t want that for you.  Instead let’s prepare you financially and emotionally, so that you can take advantage of a good opportunity on a great home, whenever it arises.

So whether you’re thinking of buying in a few months or a few years, get with a financial coach and loan officer as soon as possible. There are three key areas you’ll focus on: One, your credit. You’ll want to qualify for the best rates and therefore get the lowest monthly house payment. Have the best credit score you can have, well, up to 760, you don’t have to worry about going higher than that, because after 760, you’re in the top credit tier and it won’t make a difference in your rate if you’ve got an 800 or 760 – you’ll get the same rate. Unfortunately, credit issues are really common. Having plenty of time to deal with them is really important because credit takes time to fix. Mistakes can take many months to fix. And there’s some advice, like to pay a car payment from a business account rather than a personal account, can take 12 months to change how much of a house you can afford. So really, if you can have a loan officer take a look at your credit months or two years out from buying, do that. Do that today.

If you have less time but still want to improve your score before securing a home loan, some loan officers can also tell you exactly how much of your balances to pay down on which accounts so that you can bump your score up. I can’t tell you how many people come to me when they think they’re ready to buy, they even have a specific property picked out, and now they come to me for a pre-approval but we find out that they have bad credit, even though they estimated that they’d be in the 760 range. It happens all the time, even with sophisticated real estate investors and people with high incomes – people you would expect to be on top of their credit game. They come to me with absolute confidence that they’ll be in the top tier of credit and the reality will be that they barely qualify for any loan program at all. It really sucks because at this point, they’ve got their heart set on a property and there’s no time to raise their credit score, so they either have to get a loan with a really high rate and hope they can refinance later or miss out on this property. So don’t let that happen to you. Get past the question of whether now is a good time to buy and just know that it’s a good time to work on your credit. Sometimes building good credit is just a matter of getting better organized, and a financial coach can help you do that.

The second area of focus is on how much money you can afford to pay monthly for the house you’re going to buy. For this one, you’ll really need both a financial coach and mortgage loan officer (or someone who is both). That’s because the amount you qualify for and how much you can comfortably pay, can be two very different numbers. You’ll want to be sure that you can afford it while having enough money to go to your other needs and goals. As a loan officer, when I figure out how much house you can afford, I’m only looking at debts that appear on your credit report, but chances are you have way more bills than that. On a credit report, I’ll only see your credit cards, car payments, bank loans, student loans, and mortgage loans. What I won’t see are your home utilities or car insurance – even though car insurance is a necessary expense if you have a car. It doesn’t show how much is going towards groceries and how much you’re spending on clothing – well unless you’re putting these on credit cards, then those balances show up on your credit report so in a way it kind of does show how much on all that but hopefully you get my point. A loan officer doesn’t understand the intricacies of your finances the way that a good financial coach will. So where a lot of people get themselves in trouble is by getting a house that maxes out the monthly payment they quality for without also making sure that they can continue to afford the rest of their monthly bills and lifestyle choices. So for example, as a lender I might tell you that you qualify for a $5,000 monthly payment, but as your coach, after looking at all your expenses and other goals, like savings and investments, you should actually max out at a monthly payment of $4700. Now at first, a three hundred dollar difference might not seem like a huge deal but after a decade, that’s $36,000 that you were spending on a house that you needed for savings, investments, or other goals, like starting a business or seeing the world. You don’t want to put yourself in a house poor situation where too much of your money goes towards housing costs and you feel deprived in all other areas of life. Chances are, that deprivation wouldn’t last long, and you’d begin to buy those things on credit. You’re then having to pay 20% interest on your day to day expenses because your house is taking up so much of your income. So it’s super important to give yourself the time to prepare with both a coach and loan officer to figure out exactly how much you want to pay each month.

The third area of focus that you’ll want to have time to plan with your loan officer and agent is property type. You might think your best option is a condo but after working with your loan officer, realize that a duplex is a better option for you. Once you’ve figured out what property type you want, then you can start to narrow down the details, location, and requirements that are important to you. It’s only when you’ve taken a look, in person, at the neighborhoods (at day and night) and the type of home you want, that you start getting clear about details that may have not initially seemed important, like the layout and age of the house. Most people want a turnkey home but with enough planning you might realize that a cosmetic fixer is going to be the best way to get what you really want. You might be able to roll in the renovation costs into your home loan. That’s why getting familiar with these particulars and thinking through all these options with your lender is so important. With enough time, watching the specific kind of property you want and in the particular location you want it in, you’ll be able to spot a deal easily. It’ll jump out at you – and maybe not many others – because you know exactly how good the home is for you and that the numbers make sense in light of everything else you’re seeing on the market.

Giving yourself months or even a few years to focus on these three areas, will give you the best outcome for you, no matter the market and whether anybody else thinks it’s a good time to buy. Just be sure to get with a financial coach, mortgage loan officer, and agent well before you think you might buy so you can prepare to be the strongest, most competitive buyer you can be.

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