Friday, 9 November 2007

First Time Home Buyers

Don't bite off too much house
Don't bite off too much house...

The age old method of home loan affordability could lead you to disaster and we're finding more and more queries and complaints about affordability and first time home buyers getting themselves into debt. Here's how to get a better idea on what you can afford.

I was going to start this off by saying "20 years ago..." but it's not, it's not even 6 months ago that first-time home buyers were encouraged to maximise their profitability and put all their investments and savings into a massive house. Stretch yourself and buy that R2,000,000 apartment. Hey, for first time buyers back then it even made sense.

Lets face it folks, today, it's asking for SH!T, pardon my french.

Here's what's changed in 20 years (or more) since your parents bought their first house:
Inflation. Price increases in the last 5 years meant you could count on hefty annual raises.

It's no longer just you. A generation ago, single-income families were more common. If the breadwinner lost a job, the other spouse could go to work to save the house. With more than one person both needing salaries to cover you first time loan, there's no one on the sidelines to take up the slack - Get those kids working man.

Fortunately though, these days it's very difficult to purchase a house if you can't afford it with the credit act in place and rightly so. In the long run, especially if interest rates decide to jump up again, it's going to save you alot of heart ache.

Over the last 5 days I've received hundreds of emails from first time home buyers that are now feeling the brunt and the pain of having over capitalised on their property investments and with interest rates on R2 000 000.00 bonds sitting at 12%, you've got to be earning a lovely salary to afford those repayments every month. That's excluding your monthly living expenses, kids, entertainment, food etc...

What we're finding is that people have so badly over capitalised that they're now in the predicament where they're having to sell their properties for 20% less than what they bought them for i.e. they're making a loss! PLUS they're in debt. Just, remember, if you don't know what you can afford, you can't count on your real estate agent, a mortgage loan officer, your friends and family or an Internet affordability calculator to know what you can really afford. These tools are there for first time buyers, make use of them. That's a decision you have to make yourself after reviewing your finances, your future obligations, your goals and your gut.

Is anyone here in the same predicament, has anybody got some stories, solutions for us to read about. Please share you comments and stories with us.

2 comments:

Houston Mortgage Broker said...

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Anonymous said...

Who should I get in contact with about a states own laws about mortgage broker bonds and as such, how would I get a mortgage bonds form? I life in England and am considering moving to America, don’t know where yet however I was doing some general reading about housing and came across the term mortgage broker bonds and am a little confused, is it a mortgage or a loan to acquire a mortgage?
Also if I want to set up life insurance do I need insurance bonds? Or can I simply open a policy with a company? Im a little confuse by some of the jargon. I am not moving anytime soon but thought I should be aware of things I will need to understand.