When you are ready to go out and buy a home, I am sure you have done your research, asked for advice and perhaps visited open houses so you could make the best buy for you. Well, I did, too. My own father gave me advice many years ago. He advised me to try and buy the most home I could afford. While this advice worked for me, it may not work everyone.
If you stretch your budget to buy a home, this may work great if you don’t have a lot of other obligations and/or are planning to stay in the home for many years. Seven to ten years after you stretch your budget, sacrifice and purchase that home, you may be well ahead of the game here in Orange County. For instance, if you purchased just about anything back in 2009-2011, you have probably realized at least $100,000 and more in equity gain. Even since last year, values have gone up anywhere from 2%-7% depending on the area where you bought. However, if you purchased in 2005 -2007, you may just be breaking even right now or perhaps slightly under depending on where you live in the County. Another 4-5 years from now, though, the value of your home will most likely be more than what you paid back then.
The longer you plan to stay in a home, the less you need to try and time the market. In many instances, I think this practice of timing the market can be self-defeating. I may blog about that at some other time, but as a quick example, in 2010, I had a client who wanted to buy an investment home, had ample funds to do so, but was scared that he was overpaying and was listening to those who said the market was poised to go down again. So he did not buy. He basically threw away about $100,000 in equity he would have realized in the next 2-3 years. But the decision as ultimately his.
Keep in mind it is not just your principal and interest payments you will be paying monthly, it will be taxes, insurance, HOA payments, etc. Either you or your lender needs to factor these in to your monthly payment so you have as few surprises as possible once you close escrow.
So do what you have to do to help you make good home-buying choices, close escrow on the home that is just right for you and enjoy!