Team Abram's Blog

Today on the home page of my website, there is an article entitled "The Upside to the Downside". The article talks about how many who have done the traditional things to get ahead are wondering if they are now doing what they need to. It seems that all we hear is bad news anymore when it comes to the economy. Those that invested for retirement are taking a beating on the stock market, and home prices keep falling for those who bought instead of renting. Not to mention the rising foreclosure rate.

What we do not hear is the fact that most of the rise in foreclosures in the U.S. occurred in five counties, and while the market may have softened in several markets, real estate in some areas is still not that bad. Especially if you can manage to buy right. So what is the right way to buy?

The good news in the article was that Americans are now saving again. The article states that Americans had reached a point of negative saving, meaning that we were spending more than we made. In order to buy a home the smart way the first step is saving. I recommend that a buyer save at least 20% percent for a down payment. This is smart in a couple of ways. First, you are already building equity because you only barrow 80% of the home's value. Secondly, the discipline it takes to save the 20% shows you and the bank that you are ready to handle the responsibility of the mortgage. This will also avoid paying PMI insurance, which will make the payment cheaper.

I also recommend a 15 year mortgage. It may cost a bit more monthly, but the debt does not last as long and you will build equity faster. There are many arguments that go back and forth about paying off your home, I tend to be more conservative and prefer the idea of being debt free.

Another important factor that many do not think of is cash reserves. It is smart to have reserves in the bank to offset emergencies or times of unemployment. Three to six months of expenses is ideal. This way if an emergency comes up or a temporary lay off occurs, the mortgage can still be made.

The last thing is price. Now that prices have fallen is a good time to buy if you have all the other things in order. This would be the buy low and sell high theory. The market will eventually make a comeback, and values will increase. Never pay more than a home is worth, and ideally pay under market value.

These steps and more can make a home a blessing and keep you from becoming a statistic. If you have these items in line you are in a good position to take advantage of one of the upsides to the downside. Although these are good rules to follow in any market.