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Buying Your First Home In a Recession

By Edited Nov 21, 2013 1 3

Even though the entire world seems to be in a recession, it could not be a better time to buy your first home and leave the world of renters. Housing prices have dropped dramatically, many foreclosures are available and interest rates are at an all time low. Renting may be slightly more affordable but you are ultimately throwing your money away.

First of all, the real estate bubble finally burst and this means nothing but good things for renters with financial liquidity. Sit back and watch as the market tumbles revealing unbelievable deals that only come available in a buyers market. Snatch up your dream home at a price that would have never been reasonable a few years ago.

First Condo
Fortunately other people's failures can be used to your benefit. Because many people were buying homes that they technically couldn't afford, it caused them to eventually forfeit their homes to the bank. The forfeiting of homes resulted in many homes becoming available at ridiculously cheap rates, this is known as foreclosures. Foreclosures are generally sold below market value in order for the bank to make a quick sale so they can recoup any money they might have lost when lending to the original home owner. Foreclosure's usually come as is without any sort of warranty, but the money saved typically outweighs any sort of 'as is' clause.

Finally, even though it is doubtful that you will get a subprime mortgage, interest rates are currently so incredibly low, that even if you have to pay a little more than you planned for your upcoming home, the low interest rates should make your payments much easier to handle. To get the lowest rate possible, I highly recommend finding a mortgage broker in your area. Mortgage broker's scour the financial world to find you the best deal on a mortgage that fits your income and credit history. I used a mortgage broker when I bought my first home in BC and even though my credit history wasn't amazing at the time, he landed me an amazing rate that was substantially lower than my personal bank could offer. Ever since then, I've used a mortgage broker for all my mortgage needs and have always received interest rates far lower than the banks could provide.

Ultimately, getting into the real estate market is a long term investment. If you are trying to get into the market to flip, this might not be the best time to buy a house. However, if you plan on buying a house and making it your home you are ultimately investing in your future. Not only are you paying towards something tangible that will grow in value over time, you also increase your personal net worth and gain the pride associated with being a home owner.

In conclusion, many people are terrified to get involved in real estate because of the economic situation at hand. If you have financial liquidity and can afford a down payment, the deals that are currently available combined with the incredibly low interest rate may never be seen again in our life times. Take advantage of the recession and start building your future today.


Jan 15, 2009 1:01pm
Helpful article, a few questions though:

1) How much of your gross monthly income should be devoted to your monthly mortgage payment?

2) What are a few things you should ask a local mortgage broker to make sure they are reputable?

Jan 15, 2009 1:11pm
Hey ProxyKitten,

In my opinion, your monthly total monthly debts should never exceed 40% of your total gross household income. So if you have other debts, you should take them into consideration. If you want to air on the more cautious side, reduce 40% down to 35% to give yourself some room in case interest rates change after your first mortgage term has completed.

One thing you can do is find out if your Mortgage broker is associated with a mortgage brokerage company. Here in BC, I always make sure that any broker I use is associated with HLC (Home Loans Canada). Ask your broker what company he is associated with then contact the Better Business Bureau to make sure the company has a good reputation.

Hope that helps!
Oct 28, 2009 11:31am
This is very helpful and I would agree on getting a mortgage broker to find the best deal on a mortgage. Buying a home now is something consider especially since the costs are so low.
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