Dont Let the Wolf Eat You Up!

By: Carol Freyer

Have you heard the story about Peter and the Wolf? He was always pretending that the wolf was coming to eat the villagers because he enjoyed seeing everyone go into a panic, then one day when the wolf did come and he called out - he was eaten up because finally no one listened to him.

Well, no doubt you are always reading that realty is a good investment and that now is a good time to buy your first home and you think, "Yeah, yeah, yeah". Perhaps you are almost de-sensitized by the message, but honestly there hasn't been a better time to buy a home for years so read on for the proof!!

Yes, the wolf is coming and you will get eaten up by the increases in mortgage interest and house prices if you don't run. Best place to run to, especially if you are a first time buyer, is a real estate agent. This is because there are lots of hoops to jump through before you will know exactly how much to pay and exactly how much to put down and to be approved for both. Pre-approval will mean that you can snap up that bargain as soon as it appears.

It will take you another 2 or 3 years to catch up to anything like this opportunity. You will need to save a bigger down payment, you will need to pay larger repayments because they will be based on a higher percentage rate of interest on your mortgage, gas will cost more - even more - and your rent will be increasing because of it.

Figures illustrating that the time is ripe for house buyers (but not, alas, for house sellers) were published by the Federal Reserve. The figures which may amaze most Americans calculated the average amount of equity that American home owners are now holding in their homes. Equity is the difference between the mortgage loan on a home and the value of the home.

For example value = $200,000 minus mortgage and any other loan (say $150,000) = equity of $50,000. According to the Federal Reserve this is the fifth consecutive quarter that home owners' equity has slipped.

The Flow of Funds report from the Reserve, which is calculated every quarter, shows that the average home owner's stake in their home slipped to 46% in this first quarter. This is the lowest level since the end of World War Two. Part of this lowering happened even in the boom when owners were re-financing and drawing out more cash from their homes, not realizing that the crunch was looming.

If you can buy a home that you can plan to stay in, history shows that you will acquire a valuable asset over time. Many people have done this, and one out of every three home owners have no mortgage at all and their home is free and clear. This could be you.

Learn by others' mistakes and try to buy a home with an option for extra income. For instance: an unfinished basement could be turned into a suite and rented out in times of hardship etc. But more importantly, start investigating now about your loan chances and your down payment requirements.

Talk to your real estate agent about which types of mortgage are best (often fixed mortgages will be the best for budgeting as they offer the same payment for their duration). When all these details are in place then you can start to familiarize yourself with your chosen housing market.

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