Sometimes it can be hard to see the silver lining, as homeowners in the dark cloud of the current real estate downturn can attest. But there is an upside: many first-time home buyers who were previously locked out of the market may now qualify for a home.
If you've been looking to buy in the Rogue Valley, now might be a particularly good time. With housing prices cooling, there's not as much pressure to make quick decisions, and the current buyers' market means more favorable terms for house hunters who qualify.
The local nonprofit organization, ACCESS, Inc., helps Jackson County residents by providing programs like "ABCs of Homebuying" and "Buyers' Assistance Programs." (541) 779-6691
For information on first-time home buyer mortgages, contact the U.S. Department of Housing and Urban Development's Federal Housing Authority at (800) CALL FHA or http://www.hud.gov/fha/.
And while nobody has a crystal ball to forecast the future, local economic conditions might also be improving. Allen Broderick, a broker at John L. Scott in Medford, points out that as of July 1, Fannie Mae no longer considers Jackson County a "declining market." The recent downturn has led to a larger choice in the housing inventory, he also notes, while interest rates have remained good and pricing is competitive.
Judi Robinson, a real estate loan officer at People's Bank in Medford, also emphasizes that now may be a good time to buy a first home despite grim forecasts at the state and national levels. Here in the Rogue Valley, Robinson points out, "we don't necessarily follow housing trends in the national market."
Of course, the primary reasons to buy a first home have to be personal. Buying a home is a huge commitment of time, energy, and especially money. To make sure your first home doesn't become your first financial quagmire, consider some of these factors.
Make sure you'll be in the house for at least three years
If you believe some popular television shows, you can buy a house, slap on some paint, and flip it the next month for a hefty profit. While that might work for experienced professionals in overheated housing markets, the reality of home ownership is far more complex.
Broderick recommends buying your first house only if you plan on staying at least three years. That amount of time lets you ride out dramatic fluctuations in prices and hang on to your home's equity.
Consider the condition of the house
Some first-time home buyers think they'll get a real bargain by buying a foreclosed property. To Broderick, that can be a huge mistake.
Foreclosed homes can often be stripped down or have significant structural damage, and first-time home buyers usually don't have the skill set to make improvements or the money to hire contractors. Unless you're extremely handy or a contractor yourself, Broderick suggests you take a pass on a foreclosure "bargain."
Make sure you can afford the home
The general rule of thumb is that you can afford a home that is two and one half times your salary, but keep in mind another guideline: your total monthly debt load — including mortgage, credit card payments, and student loan payments — should not exceed 36 percent of gross pay. Of course, these are just guidelines — schedule a session with a financial advisor if you're concerned about taking on such a significant level of debt.
Carefully choose your mortgage
Robinson recommends that first-time home buyers avoid adjustable rate mortgages (ARMs), in which the interest rate is variable and can result in a nasty surprise if the mortgage adjusts when rates are high. You might think you can afford a bigger payment later on, but as Robinson points out, "you should make your decisions based on the here and now, not on the future."
Robinson is also wary of interest-only mortgages, in which the borrower only pays interest for a set period of time. Unfortunately, if the house declines in value the homeowner is left "upside down," or owing more on the mortgage than the house is worth. "These are strictly for seasoned investors," warns Robinson. "They're very dangerous, and I don't recommend them for first-time home buyers."
Buying your first home is simultaneously exhilarating and intimidating. But if you buy a home you can occupy indefinitely, maintain diligently, and afford easily, now may be an excellent time to own your piece of the Rogue Valley.