The Dilemma of the Bucks County Home Buyer

The baby boom generation was fortunate.  During their prime home buying years, home prices were rising. Their starter homes generally increased in value, and they had sufficient equity to purchase their move up homes.

Today's buyers in their 30's and 40's may want to purchase larger homes, but frequently find that their starter homes have lost value and they have insufficient equity to pay for the down payment plus the closing costs required to purchase a more expensive home.

The traditional four bedroom Bucks County colonial may sell for $300,000 to $500,000.

With a conventional mortgage requiring a 20% down payment plus closing costs, a buyer needs about $75,000 to $110,000 in cash to purchase a home. These costs may be prohibitive, but before giving up the dream of a larger home, there are options that should be considered.

 It may be possible to purchase a home with a 10% down payment, or with an FHA mortgage which requires a lesser down payment.   Also, the buyer can  request the seller contribute towards the closing costs. Buyers should discuss financing options with their agent and a good mortgage broker to determine whether the home of their dreams is affordable.

 I've heard some buyers say their current  home needs to appreciate before they can buy a new home, and they are unwilling to take a loss on their current property.  That may be a mistake. If their starter home appreciates, the larger home they would like to purchase will have appreciated as well.  Also, with inflation, mortgage rates generally rise; so, buying power decreases.  Buyers waiting for their first homes to appreciate may find themselves priced out of the move up market.

Buyers wishing to purchase more expensive homes, who can afford the down payment and closing costs, are probably better off selling their starter homes at a loss and purchasing larger homes while prices are low and mortgage rates are at record lows.

 Buyers who would like to purchase a new home, but cannot afford to put 20% down plus closing costs, should discuss their financial situation with their agent and a good mortgage broker before ruling out it out.