Buy Now, Brag Later

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What a surprise, A real estate agent who believes that NOW is the perfect time to buy. If you are skeptical about pronouncements that urge you to act now based upon predictions of the future, it’s certainly understandable. While the recent housing market crash is, in my humble opinion, not something we’re likely to see happen again in our or our children’s lifetimes, it certainly gives us pause in making predictions about real estate investments ALWAYS moving in a positive direction.

My urgency in encouraging buyers to act now is based not just on the strong likelihood of home values rising over time. It’s based upon what is happening NOW. We have a perfect storm of variables that make a home as affordable as it’s likely to be in the near and foreseeable future. First, prices have stabilized and in many communities, come down from the recent 2013 increases. Prices are expected to remain stable with moderate, incremental value increases through 2015. Those who are waiting on the sidelines for prices to drop are not likely to see homes getting less expensive.

Second, the cost of mortgage insurance typically tied to government loan programs has been reduced. In January of this year, President Obama announced that the Federal Housing Administration would reduce the annual mortgage insurance premium to .85% from 1.35%. On a $200,000 home loan, that would save a borrower $83 per month, or nearly $1000 per year. You can buy more house when you’ve got an additional $83 a month to build into a mortgage payment. Or, you can add that money to a monthly payment and pay your mortgage off faster!

Third, interest rates remain incredibly low, although not for too much longer with an inarguably improving economy. Perhaps you know that great feeling you get when comparing home mortgage rates with friends or acquaintances and you come up the winner with the lowest rate. You feel smart…you feel wise…you feel like an economics guru (even if you barely passed your college economics class). Now imagine that you’ve waited until next year and the person next to you proudly announces a 3.75% interest rate while you are paying 5% on the home you bought in March of 2016. Remember folks, interest rates in 1980 were topping 18%. Anything under 4%is a gift. And it’s not going to last for too much longer. You might be very surprised to learn that the difference between a 4% interest rate and a 5% interest rate on a $200,000 home loan amounts to a $120 difference in monthly mortgage payments

Finally, the restrictive lending atmosphere of the last several years is beginning to ease. I recently helped a family purchase a beautiful home with no down payment. Between seller concessions and closing cost assistance from the lender, they walked away from the closing table with keys to a new home and $1000 cash. While we certainly do not want a return to the crazy days of mortgage lending when anyone with a pulse could qualify for a mortgage with no proof of ability to repay, we do want to help those capable of paying a monthly mortgage manage the costs of getting into a home.

For those of you thinking about purchasing a home either as a first time buyer, a move-up or downsizing buyer, or a seasonal home buyer, I’m wondering what else you need to see happen before you believe the time is right.

 

 

 

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