A 20% down payment isn’t always possible for homebuyers, especially in markets where housing is…
The last few years have seen some rapid changes in the housing market. Many hopeful buyers are still sitting on the sidelines evaluating if now is the time to start looking for their next home. If you’re in this category of hopeful yet hesitant buyers, here are a few pros and cons to consider in making your decisions of whether or not fall 2021 is a good time to buy.
Reasons to Buy a Home Now
Low Interest Rates
|30-Year Fixed Rate1||3%||3.50%|
|Monthly Mortgage Payment||$2,223.70||$2,355.41|
|Total Interest Paid (30 Years)||$248,531.77||$295,949.22|
Interest rates are at record lows, but those watching the market say they will start to rise soon. This means if you buy now, you stand to save on your monthly payment and over the life of the loan. Consider this table on how rates rising just a little can affect your bottom line:
1Interest rates are for sample purposes only. Your own mortgage rate will be different
Just a 0.5% increase in interest rates means a $132 difference monthly and close to $48,000 more paid over the life of the loan. Failing to act while interest rates are low can cost you in the long term.
Rising Values Create Equity
Home prices are poised to continue increasing, especially if interest rates remain generally low. Buying now means you earn equity in your home without having to pay for any improvements or paying more toward your principle. This also means if you have a loan with PMI that can be canceled once enough equity is accrued, you will reach that point more quickly.
More Profit If Selling Your Home
Waiting for the market to “crash” can be a risky game. The market in your area may not crash and remain fairly stable while interest rates still rise. Also, if you are hoping to sell your home to help pay for your next one, a dip in prices can hurt you more than it helps you. Selling now when the market is tilted toward sellers enables you to ask for a lot more in your terms. Buyers are apt to allow rent back agreements and waive contingencies.
Reasons Not to Buy Now
Not Enough Savings
Whether it’s a seller’s or buyer’s market, the surprise costs of buying a home require buyers to have a good amount of cash set aside for down payment and closing fees. To compete in the current housing market, your best bet is to have a decent down payment prepared. This will also allow you to qualify for better terms on your home loan and have a better chance of competing with all cash buyers. If you’re stretched thin to afford the house you want, it may be wiser to wait for your budget to become more balanced before looking into buying a home.
It’s true that inventory has been low the last two years, and new builds have slowed down. Competition for homes has increased, especially in desirable neighborhoods. Changes in remote working standards have increased flexibility in commutes, bringing more cosmopolitan buyers into suburbia. Densely built areas are seeing an exodus to areas with fewer homes, but more living space. Lack of inventory is a true hurdle to overcome this season. However, more homes are predicted to come on the housing market and the right realtor can help get you where you want to be.
The Bottom Line
While we can discuss housing market predictions and wise money moves, the largest deciding factor in when to buy a home is whether or not you’re personally ready. If your lifestyle and home needs tell you it’s time to purchase, then the season is right for you. The team at Texas VA Mortgage can help you with your home loan, so you can be competitive in the fall 2021 market. Contact us at firstname.lastname@example.org with any questions about whether or not this is the right time for you and about what kind of loan will fit you