Best Time to Buy a House

Best Time to Buy a House
The Best Time to Buy a House is when interests rates are high. That’s because if the interest rates are high, then the price of the house is low. There is a relationships between price and interest rates. There is also another reason. That’s because it’s better to buy a house with the highest monthly rate possible, and have interest drop and then pay a lower monthly mortgage, than have interest rise and find oneself having to pay a higher monthly mortgage.

Actually, the best time to buy a house is never, but it really depends on why you want to buy a house, but more about that later.

Best Size Mortgage to Get
The best determent of what you can afford is your salary. Your repayment must be 25% of your salary, and this means that the loan is generally three times your annual salary. In order to keep the loan down to 25% of your salary, you will still need to put 20% of the house price down. This is what you can afford. Mortgage, like rent, must be related to your monthly income, not to the highest loan you can obtain. It must also be based on the salary of only one person. That’s because if one person gets ill or can’t work for some reason (pregnancy), then there will only be one income. One has to base the price of the house on what one can afford to pay during the bad times – not the good times.

Best Price to Pay for a House
The best price to pay for a house is 15 times its annual rent. So, if a house will rent for $1000 per month, then the annual rent is $12,000 and the maximum one should pay for the house is $180,000. Anything over that, and you are overpaying. When a down cycle hits, you will left with a house that is not worth what you paid for, and that is not a good place to be. The reason that the value of a house is best determined by what it will fetch in the renting market is because renters can only afford to pay from their monthly income, and they will not pay more than the accommodation is actually worth. The reason you want to stick to that formula is so that you can rent your house out and pay the mortgage with the income from the house. You might have to do that in a hurry. Life isn’t a perpetual upward motion. It comes in cycles – good and bad.

Where to Buy a House
The best place to buy a house is close to schools and work. There are several reasons for this.

• Life is not about spending an hour in a car every morning and another hour in the car every evening, tired and frustrated at heavy traffic. That’s a lot of time to lose from one’s day, and that type of stress is not good for either one’s physical or emotional health.
• There are cycles in life. There are good times and bad times. At any given moment, one might not be able to repay the loan on a car or have to cut costs to live less expensively. If one lives close to work then one can walk to work, or take public transport if it is available. The kids can also walk or cycle to school.
• As jobs continue to be lost as a result of the economy being unable to sustain itself, there will be increasing food shortages. This will produce civil unrest. The Pentagon claims that within a decade wars will be fought over food and other resources. Olivia Huffington is of the same opinion. So am I. It’s probably going to be best to keep closer to home. When things take a turn for the worst, one wants to run in a hurry. Being far from home will not be the best place to be..

Reasons To Buy a Home
The worst possible reason to buy a home is an investment. For the past foury years, studies have shown that buying a home is the worst financial investment possible. That’s because when one takes the cost of upkeep, add the cost of interest, the initial financial charges when buying, the insurance, taxes, the actual price of the house, it has been shown repeatedly to be far less than what the house can be sold for, and the cost of selling the house (commission to agent). It’s also far more than renting would have cost. The surplus money saved by renting would have accrued sufficiently over the years to be able to earn a modest retirement. In fact, some studies have demonstrated that the money saved can buy a house cash in half the time it takes to pay off the mortgage.

The best reasons for buying a home are that one is going to stay in the same area for two or more decades, would like to be able to decorate it in a way that landlords would not permit, would like to pass the house down to one’s children, or one has sufficient cash to buy one and one doesn’t want the monthly slog of having to make a monthly payment.

House Prices in the Future
Currently, at the time of writing in 2011, house prices will still drop substantially. There are a number of reasons.

• The first is that very few people can afford to buy a house as a result of less income, lost jobs, capital losses, etc. As demand is related to price, this will put pressure on those needing to sell.
• The second is that there is a surplus of homes in the market. It is said that there is sufficient stock not to build for another decade.
• The third is that those that have lost houses due to foreclosure have learnt a very bitter lesson and they will not be susceptible to buying another house in a hurry. 
• The forth is that the job market in the United States will continue to drop until industry is reestablished, and the prices are more related to rents. There used to be a time when the monthly repayment was less than a monthly rental. (And, yes, that was, and is, a good time to buy a house.)
• The fifth reason is that the requirement to buy a house in order to be accepted by the Jones’s and increase your status quo is going to vanish. It doesn’t exist anywhere else in the world.

Don’t be tempted by agents and the propaganda that is so ubiquitous around you. House prices are not going to rise for a very long time. Jobs are not going to come back. It’s the system that needs mending. This is not a cycle. And if you do want to buy a house, remember to check the rent ratio