- The Washington Times - Friday, June 20, 2008

Q. My wife and I have been renting a small apartment for nearly eight years. We considered purchasing a home when the market was red-hot but didn’t want to get caught in the feeding frenzy and wind up paying too much. Now, several years later, we are wondering if we made the right decision. On the one hand, the market has softened. Prices are no longer rising, and it appears they are dropping in some areas. On the other hand, interest rates are higher and I understand that getting a mortgage is much harder.

We have enough money for a 20 percent down payment, and we have excellent credit. What do you think? Should we get serious about buying a house? We have no plans to leave the Washington area.

A. If there’s one thing I have preached as much as anything else, it’s the notion that real estate, over time, has proven to be a good investment. However, real estate, like any other investment, will have its temporary dips.

The folks who are getting burned by a real estate investment now might share some or all of the following traits:

- They purchased a home during the market peak. Of course, they didn’t know this at the time and assumed property values would continue their meteoric rise.

- They took advantage of the easy mortgage money available at the time. Many of these folks took out mortgages that they could not intrinsically afford simply because the lender was prepared to lend them the money a big mistake.

- They had a short-term-hold plan. These folks assumed that the property value would continue to rise and that they would be able to sell the property with a double-digit profit in a year or two. Those with this plan who took out an unaffordable mortgage had a compounded problem when they realized the property wouldn’t sell at their expected price.

Your situation is very different. As long as you purchase a property and take out a mortgage that fits into your personal budget, the chances are overwhelming that the home will enjoy reasonable appreciation over many years.

In the meantime, a homeowner with a mortgage receives the tax benefits of interest and real estate tax deductions. In almost all cases, a homeowner will pay considerably lower income taxes than a renter with the same income.

While obtaining a mortgage today is indeed more difficult, especially for folks with spotty credit or no down payment, folks with good credit and a 20 percent down payment should have no problem.

Interest rates have risen during the last week or so, but not to levels that would make a home purchase impractical.

My advice is to speak with a qualified loan officer, establish a purchase price range and financing plan, get pre-approved and begin the house hunt with a recommended real estate agent.

Henry Savage is president of PMC mortgage in Alexandria. Reach him by e-mail at henrysavage@pmcmortgage.com.

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