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The best time to buy a house is hard to predict. In most parts of the United States, except Manhattan and other special cases, after five years, the house price is still lower than the peak in 2007, but the mortgage interest rate is extremely low – many mortgage professionals will tell you that the mortgage interest rate is unlikely to become as low as it was in the autumn of 2012.
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So, since you want to buy a house, the following suggestions will help you make full use of your money rather than spend it.
- 1. Ask the mortgage manager how much you can afford to borrow, and then try to borrow less money to buy a house. Under the temptation, your financial burden may increase to the limit of your ability for some good reasons, so you may face huge risks, as happened in the past five years.
- 2. Buy a house in a community where the average income of residents is equal to or slightly lower than yours. If everyone in the community where you live earns more money than you, you will be under painful pressure to catch up with the luxury life quality of your neighbors. If your budget only allows you to spend the summer vacation in the nearby national park, and your neighbors all go to Hawaii or Europe for vacation, even if you are not poor, you will feel inferior!
- 3. Buy a house that will last. If you buy a house that can live for 15 years or more, the amount of the mortgage actually shrinks. Even the smallest inflation will push up the house price for a long time. As your income increases, the mortgage amount will be relatively small. Fifteen years later, the balance of the house loan may be equivalent to that of the ordinary car loan, which means that as long as you really want to repay the loan, you can pay it off in four or five years. The longer you live in a house, the cheaper the mortgage. After living for 30 years, the house is almost free!
- 4. The higher the down payment, the better. When buying a house, the higher the down payment, the better. It’s hard to raise the down payment to 20% of the purchase price, but it can reduce the monthly payment, not only because your loan amount is small, but also because you can avoid mortgage insurance (mortgage insurance can help you reduce the down payment, but it can’t increase the value for you and your house). If your 401 (k) plan or personal pension account’s pension savings can be used as a down payment, if you are under 40 years old (you have enough time to accumulate pension), you can check with a tax consultant to make a wise decision to pay 20% down payment with your pension. Do not spend more than 20% of the down payment from your pension savings – leave the money in your pension account.