Sunday, May 16, 2004

Single homebuyers should consider the pros and cons

A column published today in the Miami Herald focuses on some of the issues which single people should consider before they buy a home.

Perhaps you're a single person with a strong hankering to buy a home. You're eager to start snaring some of the financial benefits of homeownership. Plus, after years of renting, you're ready to banish intrusive landlords from your life forever.

Still, the idea of single-handedly shouldering the financial responsibility of a home seems daunting. Your biggest worry? That you could lose your job. Should employment qualms stop you from fulfilling your housing dreams?

No, says real estate analyst Keith Gumbinger. ``Why hide in the closet and keep from living? Buying a home provides tremendous psychic comfort.''

For most people, any unease they feel about the economy is not enough to keep them from buying a home, says Gumbinger, a vice president at HSH Associates, a consumer finance research firm.

One big draw to homeownership for many singles is the tax-deductibility of mortgage interest. Another is the widespread belief that most residential property will continue to escalate in value in coming years. Then there's the issue of mastery over one's domain -- a concept with indisputable appeal.

Yet as powerful as the urge to own may be, Gumbinger says no one should make decisions about buying and financing a home without considerable forethought.

To be sure, there are times when would-be homebuyers should put on the brakes, at least temporarily -- especially if they're single. This would certainly be the case if your job is in peril or your employer is in a financial bind. Even if your job seems secure, you may wish to arrange your home purchase plans to leave yourself a budgetary cushion each month.

''You don't have to spend as much as your mortgage lender's ceiling allows -- particularly if you're single and feel financially vulnerable,'' Gumbinger says. Here are several pointers for homebuyers:

 Select a home you could sell quickly if you had to. Sid Davis, author of A Survival Guide for Buying a Home, a new book by the American Management Association,says the best time to think about resale is when you're choosing a property.

If you can afford it, he says the best bet for resale is a single-family house with several bedrooms that's in a prized neighborhood. It's not only families who crave extra bedrooms.

Even condo apartments designed for singles and couples sell more quickly if they have two bedrooms, rather than one, according to Davis.

 Try to buy in an area with strong public schools. Through his 23 years selling real estate, Davis has noticed accelerating interest among buyers in the quality of public schools. If you're single and have no children, you may be indifferent to the reputation of schools in the area where you plan to buy. But to increase your odds of making a sound investment, you should still check out the local schools before taking an ownership stake in the community.

 Exercise caution when considering a home that could require costly repairs. An older home usually gives you more square footage for the money than a newly constructed property in the same area. But expense-conscious single buyers should make doubly sure that any older property they pick won't compel them to bankroll expensive repairs to the heating, air-conditioning, plumbing or electrical systems.

Some purchasers, faced with rival contenders for the same hot property, feel they must waive the right to a home inspection to compete. But Davis says such a waiver is especially risky for single buyers bidding on a property that's more than 12 years old.

 Seek a mortgage tailored to your personal plans. Gumbinger says single homebuyers who plan to stay in their property for a relatively short time are wise to consider a ''hybrid'' mortgage. This type of home loan typically guarantees a low fixed-rate for three, five, seven or 10 years before converting to an adjustable rate mortgage.

Hybrid loans offer one key advantage at the front end: cost. Many are initially priced at least one full percentage point below traditional fixed-rate 30-year mortgages, Gumbinger notes.

Taking a hybrid mortgage could be beneficial to single people who are sure they'll be selling after several years of ownership.

If your future plans are hazy, you'll probably want to stick with a standard fixed-rate loan, or seek to clarify your professional plans before choosing a mortgage.

''Consulting a career counselor before making a major housing investment is not a bad idea,'' Gumbinger says.


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