For most Americans, a home is the biggest purchase ever. In a normal economy this would be scary, but with the housing market trending upwards (although some markets seem to be slowing down), mortgage rates are higher than they have been in a very long time. If that’s the case, it’s downright terrifying.
Buying a home comes with risks. I don’t understand the purchase issues that aren’t showing up during the inspection and I’m afraid everyone will overpay and end up with an asset worth less than the purchase price.
The good news is that American history generally shows that, given the time, home prices will rise steadily. It matters, and whether more, the same, or fewer people want to live where they bought a home.
Brian Rugg, chief credit officer at mortgage lender loanDepot, answered TheStreet’s question about whether to rent or buy given the current market.
Daniel Klein: How do you decide if renting or buying is financially right for you?
Brian Rag: Everyone should consider starting to build their wealth from the day they buy their home. And when you pay your rent, you’re paying someone else’s mortgage.
Buying a home is arguably one of the biggest drivers of intergenerational wealth creation for most Americans. If you’re in a position to buy a home and it fits your short-term goals, it might make sense to buy now and start building your capital.
Buying isn’t always the best option for everyone, but renting might be smarter. If you live in the area but don’t plan to settle there, or if you may be relocating for work or family, renting may be a better option in the short term.
Owning a home also comes with additional maintenance and expenses, so you should always plan for unexpected repairs that can be costly.
Klein: Isn’t it an exaggeration to say that house prices generally go up over time?
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Lugs: Historically speaking, home values typically increase over time. That said, depending on the impact on supply and demand, a recession or other potential unforeseen events (such as natural disasters) could cause home prices to fall in certain markets. If you are considering buying a home, remember that a home is a long-term asset and stock gains are typically realized over time.
Klein: Can you explain today’s mortgage interest rates in historical terms?
Lugs: Interest rates today are higher than in recent history, but they remain very low for the most part. I still remember when my wife and I purchased our first home in March of 2000. Considered a decent rate at the time, he had an interest rate of 8.5%.
One mistake I’ve seen is to get too caught up in one factor, such as interest rates, and base your buying decisions solely on that factor. If you wait too long for ideal market conditions, you may miss the opportunity to start building your equity. Ultimately, multiple factors should be considered when deciding if it’s the right time to buy in the current situation.
Our first home wasn’t even a one bedroom. We had a loft that we used as a bedroom and 1 bath. But because we bought it at the time of purchase, we were able to sell that house a few years after our son was born and upgrade it to a home that met the needs of our growing family. was helpful.
Klein: Do you think younger buyers are getting discounted from the market?
Lugs: All types of buyers, not just young buyers, are currently being discounted from the market. There is a nationwide affordability problem due to a shortage of affordable housing inventory due to a number of factors. Starter homes are either severely scarce or increasingly out of reach for first-time home buyers as home prices and interest rates rise.
Klein: What’s your number one piece of advice when buying a house?
Lugs: When considering buying a home, consider multiple factors and ask yourself specific questions. Does it make sense in the short term and beyond?If you can afford to buy stock and start building and it makes sense for your situation, seriously ask yourself if the benefits of waiting for ideal conditions are really worth it.? Remember, after all, the longer you pay your rent, the longer you have to build wealth for someone else.