Purchasing a home is becoming a necessity during this pandemic. So people are investing and saving as much as they can in hopes of gaining enough to buy a home. But this might not be enough.
Home prices are increasing by the minute, and if the trend continues this way, many of us might not be able to purchase a home in the future. However, you can buy your dream home this year through some creative financing.
It’s not easy to buy a home this year. With the combination of COVID-19 and the housing shortage, the real estate market isn’t faring well. In addition, construction materials have reached an all-time high, and we’re struggling to find people willing to work on construction. Because of this, homebuyers have to suffer from increased home prices.
Home prices have reached an all-time high this year. The average home price right now is around $374,000. However, this can depend greatly on where you plan to live, with states like Oregon and Utah having the most expensive housing markets. It’s problematic for many Americans because it’s their goal to purchase this year. But the numbers aren’t adding up.
People are struggling to save due to the pandemic and other problems in life. Add to that the fast acceleration of inflation currently, and you have an economic disaster that can rival the 2008 financial crisis. However, don’t be afraid. Unlike before, our financial infrastructure has changed rapidly. This year, we now have various options to finance home buying at minimal risk. But first, let’s answer the question that’s going through your mind: is this year the right time to purchase a home?
Should You Buy a Home This Year?
There is no right time to purchase a home, and many financial experts will tell you that. People buy a home quite erratically. Many expected that people would apply for mortgage loans and purchase homes because interest rates were at an all-time low when the pandemic started. However, this wasn’t the case. People continued to hold off their home purchases until last year when prices have reached an all-time high.
There is an order to this madness. Many financial experts argue that people purchase homes and get loans when prices are high because they can also sell them at a much higher price. Many are looking into their homes as a financial investment more than anything else nowadays, and it’s undoubtedly an innovative way of looking into things.
If you’re purchasing a home for the sake of living in it, it might be good to hold off your purchase until prices decrease in the coming years. But if you’re dedicated to purchasing a home this year, here are some financing options that can help you out.
The very first thing you should consider is a Federal Housing Administration (FHA) loan. People who are low to medium-income earners in their state can apply for a generous loan from the FHA. Depending on the price of your home, your earnings, and how much risk you can take, you can borrow for as much as $970,000 from the FHA.
FHA loans are known for having low-interest rates. The minimum down payment for FHA loans is also known to be some of the lowest of the market, only requiring you to pay 3.5% of the loan if you have a credit score of 580. This should be one of your main priorities if you want to purchase a home this year.
Finding an Investor
Your next option is to find an investor. Believe it or not, there are many investors out there willing to help you purchase your home. Instead of getting a conventional loan, these investors can buy the home for you, and you can pay them until you own it. Unlike getting a loan, this is a more privatized option, in where you consider the home as a company.
In this kind of setup, you and the investor own a percentage of the home. You can choose to purchase off more of the home equity by paying more to the investor. The investor can also choose to pay you instead to retain his home’s equity. It can be a smart decision and much better than renting.
IRA and 401(k)
Another option is related to your retirement accounts. Many think they can’t withdraw from their retirement accounts until they’ve reached a specific age. But you can withdraw from your IRA and even 401 (k) for the sake of a home purchase. This won’t apply the 10% penalty fee for withdrawing earlier than the intended age, but there is a caveat to this, you can only withdraw up to $10,000 from your account. It’s not much, but it can help you with down payments.
Everyone has financial obligations to fulfill this year, making it hard to buy a home. However, through these financing options, you have the chance of purchasing a home this year without much risk.