Housing: FOMO is fueling a homebuying surge that could become ‘a curse’
A pandemic, historically low mortgage rates and record lows in real estate stocks are helping many homebuyers skip critical steps to break into the hot housing market, according to a financial expert.
"You see people have this urge to rush and get things done in order to miss something," Chris Hogan, personal finance expert and spokesman for Ramsey Solutions, told Yahoo Finance Live (video above). However, he added, "There is a process that we must follow to ensure that buying a home is more of a blessing than a curse."
Read More: Here's What To Do If You Want To Buy A Home In 2021
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Home buyers can get over their heads financially if they are drawn into a bidding war. Others can bypass a home inspection to find black mold in their basement after closing.
All of this can be avoided, said Hogan.
"I really want to point this out to people because I also read stories from people who are living their nightmares," Hogan said. “Let's face it, the goal is not to buy the house. The goal is to own this bad boy. "
A "sold" sign reads on a lot as construction continues in Westfield, Indiana on Friday, September 25, 2020. (AP Photo / Michael Conroy)
Hogan offered a three step process to ensure you were in the right financial position to buy a home.
No More Debt: Pay off credit cards, student loans, and car loans.
Build up your emergency savings: Save on living expenses by at least three to six months. "That way you have a pillow between you and life," said Hogan.
Read more: Buying a Home: What You Need to Know About Home Ownership
Have a game plan for your home purchase: For Hogan, this means knowing how much to spend on your home purchase within its three guidelines:
Get a 15 year fixed rate mortgage
Make sure your monthly payment is no more than 25% of your take-away pay
Bet at least 10% but aim for a 20% down payment to get more equity and avoid paying for private mortgage insurance.
"Having these guidelines in place will ensure that you are buying a home the right way," he said, "rather than just jumping at guns because your parents said so or your neighbors did it."
Janna is an editor for Yahoo Money and Cashay. Follow her on Twitter @JannaHerron.
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