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Waiting To Buy Can Cost You Money!
If you're a potential first-time buyer wishing you'd taken the home buying plunge
while rates were low, it's not too late to dive into the market. In fact, even
with interest rates on the rise, waiting to purchase a home could end up costing
you money.
Let's say you're interested in buying a house that costs $100,000, but you believe
interest rates might fall if you waited one year to purchase. Would you really
save by waiting?
Probably not. If you were to purchase today, principal and interest payments on
a $90,000 loan (after a 10% down payment) would be $660.39 at 8.0% interest.
But if rates did fall over the next year, say by one-half percent to 7.5% interest,
you would have lost money by waiting. Appreciation at even a meager 3% annual
increase has now elevated the cost of the home by $3,000 to $103,000. That means
that you'll need $300 more down payment for a 90% loan. And a larger loan could
mean more closing costs plus a higher mortgage amount could make loan qualifying
tougher. Don't forget that based on the type of home you wish to purchase, it
might not be as readily available later, especially if you purchase in a strong
seller's market.
Financially, the bottom line is that even though your principal and interest payments
would be $11.49 per month less with the lower interest rate, it would take you
more than twenty-one years to recoup the $3,000 additional money it cost you by
waiting. ($3,000 divided by $11.49 = 21 3/4 years.) That figure doesn't take into
account lost tax benefits or even the value of the monthly rent you're pouring
down the drain as a tenant. It's been said that if you're not buying a home for
yourself, you're purchasing one for someone else. Why let your landlord be the
financial winner just because rates are edging up?
Perhaps you're one of those would-be buyers wanting to pay off debts before taking
on a mortgage. While that is a very prudent undertaking, it may not make financial
sense. especially if your debt-load is not excessive for your income. The flexibility
in today's extensive menu of mortgage programs allows credit-worthy buyers carrying
significant debt a variety of ways to secure the type of loan they need, even
if qualifying ratios are outside of the usual parameters. Loans include low-documentation,
no-documentation - even stated-income loans where you state, but do not prove,
your gross monthly income.
First-time buyers should not overlook the importance of employment in the home
buying process. Many buyers hesitate making their first home purchase because
they're afraid of being downsized, right-sized, or otherwise having their income
cut. But since lenders want to see a work history of approximately two years employment
(which could include formal job training/education) it makes sense to purchase
once that track record is established.
Purchasing a home is not for everyone but for those who do, timing is important.
If home ownership is in your future, don't let fluctuating interest rates dampen
your enthusiasm----or worse yet, end up costing you money by waiting to purchase.
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As
your Real Estate Specialist, our job is to help you..... help you find a
home that meets your lifestyle, location and budget requirements within
the time frame that you need to purchase and occupy the home. 
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