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Your monthly mortgage payment will consist of four things – principal, interest, insurance and taxes. Together these are known as your PITI. If you were to get a fixed-rate mortgage your principal and interest will remain the same regardless of what happens to the economy. But your property taxes are calculated by your local county government based on its assessment of your property’s value. This means your property taxes could go up at any time either because your county assesses the value of your home at a higher rate or your local government decides to increase its tax rates. You need to ask yourself if your budget would accommodate an increase in your property taxes. You may not be in a great position to buy a home now if your budget is so tight that an increase in your property taxes would cause you to fall behind in your mortgage payments.
If you choose to buy a home in a community where there ‘s a homeowners' association (HOA) you will be charged a mandatory monthly fee. If you don't pay this fee, the HOA could put a lien on your house. In addition, it could decide to raise your monthly payment at any time. Would your budget accommodate a rate hike? You need to think about this.
Could you cover maintenance and repairs?
When you move from renting to owning you become your own landlord and will be required to pay for all those maintenance costs and repairs that come with having a house. Would there be enough money in your budget to fix the HVAC, refinish your floors, have a leaky pipe replaced, install a new hot water heater or repair a broken garbage disposal? A good rule of thumb is to budget 1% of your house's purchase price annually for maintenance and repairs. As an example of this, if you were to pay $300,000 for a house, you should put aside $3000 per year or $250 per month to cover these costs. Of course, you won't be required to spend that much every month. There are some months when you won't spend anything. But there could be a month when you find you must replace every window in your home at a cost of $7500.
How long will you be there?
When you choose to buy a house you will end up paying thousands of dollars in closing costs. This will include things such as title insurance, transfer tax, an inspection, attorneys’ fees and real estate commissions. If you're going to stay in that house for a number of years these costs will be spread out over time. On the other hand, if you think there’s some reason why you could be selling the house after just two or three years those costs, plus your homeowners' insurance, mortgage interest, maintenance and property taxes might add up to more than you would pay in rent over the same period of time.
The net/net of all this is that the answer to whether or not you should buy a home this year has more to do with your life plans and personal budget than what's happening with the economy.