Buying a House now?

This week when I was reading CNN headlines, one particular one shocked me. According to CNN now is the best time to buy houses (in 4 years). Most people do believe “buying property is always better than renting”, because renting is just throwing your money away and help the owner pay his mortgage. Buying a house is also a good investment and you can get foreclosed houses at a bargain price.

Well, the statement is true to some extend. However, there are a couple points new home owner tend to ignored. And I personally doubt this is the rock bottom of the "sub-prime mortgage".

1. Interest adds up even at 6%:

$100 compounded at 6% for 30years equals $574. So taking a huge long term loan you will be paying interest half of the time.

2. Try to save up 20% down.

0%, 5% or 10% down will only make you pay more interest.

3. You don’t need a 5 bedroom house with front & back garden and a swimming pool.

Again, huge long term loan is a no brainier. Be realistic with what you need and know what you can afford.

4. Can you pay your mortgage for half a year with your emergency fund?

In uncertainty times like theses, companies will layoff staffs to cut cost. Also, it will be tough to find a job, or sell your house.

5. Foreclosed houses tend to need heavy maintenance.

Think about it. You’re fire, can’t pay your mortgage, bank foreclosed your house. You might break a wall or two, or at least trash your house before you leave.