We Educate You On the Home Buying Process
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We Guide You To Purchase Your Home on Your Terms
We Help You Finalize Your Home PurchaseDCU Realty's Home Buying Guide
Should I Buy a House Now?
The Real Estate market has bled home equity over the last several years. News casts tell of foreclosure nightmares as countless homeowners have lost their homes. Many mortgage companies are unable or unwilling to refinance mortgages. Homeowners who placed confidence in the increasing equity of their homes are postponing retirements. We've suffered the greatest recession in modern history with many markets down over 30%.
Should I consider buying a house now? Think about the following . . .
Real Estate Prices are at Bargain Levels
The economy is bottoming out. The worst is over. Unemployment is slowly but consistently receding. People are beginning to spend again. Businesses are beginning to hire. This turnaround will eventually result in an increase in housing demand which, according to the laws of supply and demand, will eventually lead to home price increase. Have we reached the bottom of the real estate market? No one knows for certain.
Markets often run in cycles. Our housing market may continue to slide, but it's impossible to recognize the bottom of a market. There are numerous houses on the market, at prices more affordable than in recent years. Buying a house is definitely something to consider.
According to CNN Money, there's a forecast of a -2.8% home price change from the 2nd quarter 2011 to 2nd quarter 2012. However, they're also predicting a +4.4% home price change from 2nd quarter 2012 to 2nd quarter 2013 in the Cambridge-Newton-Framingham area. Housing prices are predicted to rise. Bargain home prices will not last forever.
Mortgage Rates Are Historically Low
During the early 1980s, a mortgage rate of 11% was a great deal. Many rates at that time were higher. Today mortgages rates are in the 4% range. That's even several percentage points lower than just a few years ago.
However, consider that inflation will begin to pick up as the economy improves. When it does, mortgage rates WILL RISE and these historically low mortgage rates will no longer be available.
Fannie Mae expects interest rates to rise a full percentage point within 2012. If you wait a year until you purchase a mortgage, payments will be considerably higher. One would need a home price reduction around 10% to keep payments the same. Whereas prices may still recede, they're not expected to be down that much.
Even an interest rate increase of 0.5% could add over $100/month (every month) to a mortgage payment. For example, a $350,000 priced house with a 20% down @4.5% interest will run about $1419/month. But paying an interest rate of only 0.5% more to 5% jumps the payment to $1503.
A smarter option if you have the desire and are financially able to purchase a house, may be to lock in the lower rate now.
Your House Is Yours To Do With As You Please
With ownership comes a sense of pride. Renting can, in some situations, be more economical. But rents have climbed with increased demand from those who cannot, or do not, want to buy. Renting is also more restrictive. Homeowners determine the colors, the landscape and are in control of the upkeep and in general take better care of their living space than those who rent. No need for permission to change a color, update an appliance, or upgrade your property. And there's no necessity to move due to the whims of the landlord
Your Monthly Costs Are More Consistent
With a fixed rate mortgage, principle and interest are fixed for the life of the loan. Not so with rent. When you rent, you need to be prepared for a significant increase in rent for the coming year when you sign your new lease. Property taxes are often much more predictable than the landlord.
With the amount of foreclosures, rentals have become more scarce – and pricey. Predictions of 5% rental increases this coming year (2012) add to the advantages of home ownership.
Mortgage Interest is Tax Deductible
If you itemize your deductions, mortgage interest and property taxes may be deducted. This added benefit can often make ownership more economical than renting in some circumstances, especially with larger mortgages.
There are Many Motivated Sellers
Home builders are eager to sell their new homes. Homeowners who need to sell are often lowering prices or offering other incentives to home buyers. Mortgage lenders are offering lower closing costs. There is a convergence of factors working in the buyers favor now that might not come along again in our generation.
It's a Buyer's Market . . . That Won't Last Forever
With the recession and collapse of financial markets came a glut of homes on the market at lower prices. As foreclosures grew, many ideal homes became available.
But with the bottom in sight, and signs of an improving economy, now is the time to begin searching from the many homes available if you're in the market for a new home. Home prices are not predicted to spike upward any time in the near future, although in some markets prices are beginning to increase.
With the glut of houses on the market, you're less likely to become involved in a bidding war. Great houses are available at reasonable prices. However . . .
This type of home buying opportunity might not appear again within our generation!
The economy will improve. The housing glut will eventually disappear. The laws of supply and demand will come into play, and the present opportunities in real estate will only be memories.
. . . Yet Lending Criteria Is Tight
Lending practices are tighter than they have been in the past. The time of relaxed mortgage qualification is over. Prolonged mortgage qualification with more exacting standards seems to be more of the norm and can delay and discourage would be home buyers.
And it will be tighter for larger loans. Beginning on Oct 1, 2012, the maximum amount for a conforming mortgage will decrease from $ 729,759 to $625,500. That means if you need more than 625,500 you'll be paying jumbo mortgage rates, which are traditionally higher than conforming rates.
So . . .
Check out DCU Realty now. We're part of DCU which has direct connections to DCU Mortgage. Often we can help to simplify the mortgage process. We even help you become pre-approved online.
Check out our rates. They're some of the lowest available. Plus we'll rebate $500 if you purchase a home with us and purchase your mortgage through DCU Mortgage.
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