7 Things To Consider Before You Buy Your Honolulu Home
October 20th, 2009 categories: For Buyers
As a Honolulu Realtor, I have generally believed that owning your home or condo is better than renting it. There are too many benefits to home ownership, however, a recent Washington Post article, made me think again.
“Don’t get me wrong: By encouraging thrift, self-reliance and neighborliness, individual homeownership can benefit society. Government support was, therefore, a wise investment. But homeownership is not for everyone — it can’t be. Transient young people don’t need or want mortgages and maintenance; ditto the frail elderly. More broadly, there are some people who just can’t afford it.”
CLICK HERE TO READ THE WASHINGTON POST ARTICLE
After some thought, here are 7 rules that will that, if followed, help your Honolulu home buying experience be positive and profitable.
1. Buy what you can afford. I have been through two (2) financing bubbles: the most recent sub-prime generated bubble; and the Savings & Loan bubble of the mid-1980’s. In both, I saw people buying properties they couldn’t afford. Some were speculating and hoping that they could sell the property quickly and make a profit. When the bottom fell out of the market, their carrying costs ate them alive and forced them into insolvency. Others were caught up in the “go-go” market and bought more than they could chew. When you buy something you can afford, you are in a position to ride out the inevitable market cycles.
2. Don’t buy for the short-term. As I have said in previous posts, if you need to move away from Honolulu 2 years from now, you may want to continue renting. However, if Oahu is going to be your long-term home, then you are safe buying a home or condo at any time. Here is the thrust of home ownership, you have to live somewhere and you might as well use the dollars you would pay in rent to create the possibility of a future financial benefit for you.
3. Let a worst-case scenario guide you. We Americans are generally optimistic, however, when buying a home take a conservative view of the possible growth in your income. Base you ability to pay on your current income, not on what you might get in the future. This way if the annual raise doesn’t arrive, you will be in a position to continue to make your monthly mortgage payments.
4. Don’t get an Adjustable Rate Mortgage (ARM). I don’t like ARM’s. ARM’s are generally used to get a buyer into something that they can’t really afford now. They are based on possible future income increases and that you can make bigger payments as time goes on. ARM’s fly in the face of rule #3 stated above. Stay away from ARM’s!
5. Be sure to consider your life style and drive times. A big home with a big lot is a huge attraction. In order to get one of these at an affordable price on Oahu, you will more than likely be buying outside the core of Honolulu. If you work or have a child that attends school within 5 miles of Diamond Head, make sure that you calculate your drive times into your decision. I know many families that have beautiful home that they never see it in the light of day. In order to get everyone into town on time, they get on the road before the sun is up and come home after it is down. Better to have a smaller cozy condo that is a 15 minute drive from school and work, than to spend over an hour each way to and from home every single day.
6. Try to anticipate your future needs. About 2 months before my daughter was born, I purchased a 1-bedroom 1-bathroom condominium. It worked at the time, but as she grew, I very quickly needed more space. Thankfully, the market favored me as a buyer, but if it had not, I might have had a situation that was not optimal. As you make a buying decision, be sure to think about the things that might be happening in your life. Will you have children? Is it possible your in-laws could come to live with you? What about a home office? Take it all into account.
7. Don’t plan on Refinancing. Some plan on making repairs or improvements with future dollars that come via refinancing the home. Many times one is able to refinance, but don’t think it is an automatic option. If values drop your property may not appraise at a price that will allow a refi. If your income drops you may not qualify for a new larger loan. A rise in interest rates could kill any future loan too. In other words, make sure a home meets your needs without having to refinance it in the future.
If you would like to discuss your real estate needs, feel free to call me at 808-737-2093 or toll free at 877-737-2093. You can email me at keahi@lava.net.
; ?>/images/MatoChiclet.gif)
