There are so many things to consider when buying a home, location, style, financing etc. One question that is bound to arise during the home buying process is whether to buy now or wait. This is no easy question. Should we save more money for a down payment? What is going to happen with interest rates? Are home prices going up or down? There is a lot involved with timing the purchase of a new home. Here are some things to consider when deciding to buy today or wait until next year.
The interest rate for your home mortgage will have a dramatic effect on your monthly payment, the maximum purchase price of your home, and the overall cost of your mortgage. Here is a little example. Let’s say you are considering a $250,000 home. Assuming 30 year conventional loan with 5% down and average taxes and insurance, the difference in your monthly payment will be about $170 and the difference in the overall cost of the loan is over $60,000! It is common sense; a low interest rate will save you a lot of money in the long run.
So when considering whether to buy now or wait, the question is whether the rates next year will be higher or lower. In 2011 and 2012 we have seen the lowest mortgage interest rates in history. The rates have been kept low to stimulate the economy. While the rates may remain low in the near future, most economists believe they won’t go much lower than they are now. As the economy improves the rates are likely to increase. If you wait, you have a chance of a slightly lower rate, but you run a far greater risk that the rates will be higher.
You may also wonder what will happen to home prices. Home prices are largely affected by the state of the housing industry and by the economy in general. Historically home prices have appreciated between 4% and 6% a year. In the last 10 years we have seen the housing market boom and bust. In some hard hit areas, the prices of homes are still declining, but in many markets the values of homes have begun to appreciate again. Locally speaking, the National Association of Home Builders has recently put Salt Lake and Provo on their Improving Housing Markets Index. As with interest rates, there is chance home prices will be less if you wait a year, but with the improving economy it is more likely that home prices will begin, or continue to, appreciate.
Is a home a wise investment? If you are renting the answer is a simple yes. Why continue to throw your money away renting when you can start building equity. What if you own? What if your home isn’t worth what it was 5 years ago? Many see that as a good reason to wait for home prices to appreciate again. Here is the problem. When the home you own appreciates, so do all the other homes in the market. If you wait you may be able to sell your home for more, but you will also pay more for the home you buy. Conversely, if you sell now you will sell your home for less and you will pay less for the home you buy. The difference is the interest rate. If you hold the home you own you will be paying a higher interest rate than you would pay on a new home at the current historically low rates. You are better off making the move and starting fresh at a lower rate.
In addition to interest rates, home prices, and investment opportunities, Ivory provides many other reasons to buy today rather than wait a year. We can help you fix your credit. We can help you sell your home. We can help you obtain the loan that best fits your situation. We may even be able to help you with the costs of financing. Whatever your situation, there is a good chance Ivory can help you take advantage of a great time to buy.