Owning a Home is a Solid Investment

Buying a home in this economic climate

June is homeownership month, and at Coulee Bank, we have good news for you. Even though you may be apprehensive about buying a home in this financial climate, rates won’t stay high forever. It’s better to buy the house and rent the rate.

Owning a home is a solid investment offering predictable monthly payments with a fixed-rate mortgage. You earn equity each month which is like savings. You can tap into the equity or savings for home upgrades once you have built enough equity.

Should I buy a house now or wait?

Kris Farwell, Director of Mortgage at Coulee Bank, paints a telling picture of why you should purchase a home in this financial climate. She says, “Anecdotally, in 1971 the average interest rate was just over 7% (vs. approx. 7% currently). At that time, if you’d waited to buy until the interest rates went down, you would have waited until 1993.” That means whatever home or apartment you lived in during those years would have helped your landlord gain equity in the property they owned. Meanwhile, real estate values quadrupled in the same 22-year period. “Don’t wait. Marry the house, rent the rate!” 

Am I financially prepared to buy a house?

There are several things to consider before you buy a home. First, do you have a steady job? While this may seem obvious, think back to 2020 when the pandemic forced millions of people to be furloughed. While we cannot predict the future, it’s good to consider the stability of your job.

Are you prepared to stay in the area long-term? Can you envision yourself in a home for at least 3-5 years? If you are contemplating starting a family, you know you are in it for the long haul.

If you are comfortable managing debt, and you have an emergency fund already established, you are a good candidate for buying a home. A low debt-to-income (DTI) ratio is an important factor in qualifying for a loan as well. But what is DTI?

What is Debt-to-Income Ratio?

Farwell says, “Debt-to-income ratio is all of your monthly debts including future house payment, (principal, interest, taxes, private mortgage insurance), homeowners’ association fees, car payments, student loans, credit cards, etc.” This number as a percentage of your income before taxes is your debt-to-income ratio.

Debt not included in monthly obligations are monthly subscriptions, cell phones, car insurance, etc. Farwell recommends talking to a lender who will be a true consultant as you can often qualify for a loan that has a payment higher than you’re comfortable with. Talk with your local lender about how you spend your income to meet your lifestyle. Farwell says, “A true mortgage professional, like the lenders at Coulee Bank, can help you evaluate your financial situation and credit profile and help you get pre-approved or make a plan to help you work towards buying a home.”

Can I afford a down payment?

“I can’t give you a yes or no answer because there are a lot of different programs for first-time home buyers,” says Farwell. “Some programs offer 0% down, and most offer a minimum of 3-5% downpayments. There are also downpayment assistance programs you may be eligible for.” But, she says, a downpayment isn’t the only factor. There are closing costs that can vary from 3-6% of the purchase price. To help with those costs, sometimes family members can help, or you can ask the sellers to contribute.

All told there are a lot of moving parts, but it doesn’t need to be scary or intimidating. We are ready to consult with you today to help you meet your homeownership goals.