Peace of Mind for Homebuyers Worried about High Unemployment by EnRoute Team on November 12, 2009
Peace of Mind Home Buyers Worried about High Unemployment- provided by "This Month in Real Estate"-KW
The average duration that unemployed workers are out of a job is currently more than six months, near the highest level since the bureau started tracking the figure in 1948. The total number of unemployed people stands at 15.1 million. 5.4 million of those have been looking for work for more than 27 weeks.
With incentives in the housing market, including very low interest rates, a large selection of homes for sale in many markets, and highly affordable home prices, concerns about the job market and possible unemployment have held back many potential buyers.
Here are a few suggestions for potential buyers and current homeowners:
- Buy well within your means. Although home buyers often want to buy a home they can see themselves growing into, stay within a conservative percentage of what you currently make. If you had to take a part-time instead of a full-time job, if your salary or hours were cut, or if you become a one-income household instead of two, make sure your monthly payment would still be attainable.
- Put down a large down payment. Not only will your monthly payments be less, but the equity from the down payment creates a buffer zone. If you put 20% down when you purchase your home and home prices in the area drop 5%, you still have at least 15% equity in your home. For sellers, this built-up equity provides flexibility-should you need to sell in a hurry.
- Have an emergency fund. Experts advise everyone, not just homeowners, to have an emergency fund of at least six months’ worth of expenses. This fund should be saved in a liquid account, like a money market or savings account, for easy access if needed quickly. With the average time to find a new job currently above six months, seven or more months of savings is a good goal.
- Pay down other debts. Lowering or eliminating debt service is always a good move and is particularly wise in the current job climate. If you were without a job and income, lower fixed monthly expenses help ease your financial burden and stretch the money in your emergency fund.
Sources: Bureau of Labor Statistics, CNNMoney.com, etc.