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4 Financial Reasons to Buy Now

As Dean Hartman said last week, the purchase of a home is a personal decision. However, we want to give everyone four great financial reasons why you should not wait before taking the plunge into homeownership.

Interest Rates Are Increasing

Interest rates have increased almost 3/4 of a point in the last six months. Most experts expect rates to continue to increase through the year. Interest rates along with price determine the overall cost of a home. Even with prices softening, if interest rates rise, it may be less expensive to buy now rather than wait.

The 30-Year Mortgage May Disappear

There has been much debate regarding government’s role in providing support for homeownership. There are several experts who believe If Fannie Mae and Freddie Mac’s roles are eliminated, or even limited, it may be the end to the 30-year mortgage. This concern is addressed in MSN Real Estate’s  Is it curtains for the 30-year mortgage?

QRM Requirements Could Be Much More Stringent

Here are proposed changes to the requirements for a ‘qualified residential mortgage’:

  • Certain mortgage types would be eliminated
  • You would need to put a minimum of 20% down
  • You would need a minimum 690 FICO score
  • The ratios of income to both the mortgage payment and overall debt would become much more conservative (28% and 36%)

There would be loans available to purchasers who don’t qualify under the new rules. However, they will probably be more expensive to the buyer (both in rate and costs).

Rents Are Expected to Increase

The supply of available rentals is decreasing and the demand is increasing. That will lead to an increase in rental costs throughout the year. The Wall Street Journal this week quoted a report by Reis, Inc:

“Expect vacancies to continue declining, and rents rising through the rest of 2011 at an even faster pace.”

Bottom Line

You may be waiting on the sidelines to see if prices will continue to depreciate before you purchase a home. The mortgage expense is a major piece in the overall financial picture of homeownership. Make sure you consider it when timing your decision.


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30 replies
  1. Lilly
    Lilly says:

    One day you say real estate us local, then the next it’s national, and you’re always looking for a twist for why people should rush out an buy a home. And today you point out thy rates may never be so low and mortgages may never be the same.

    What I see here is a tyipcal realtor mindset…it’s always the right time to buy. The problem however is that people aren’t buying into your logic. Rates were 20% lower for the longest time, yet homes weren’t selling as wildly as you would think.

    It’s not all about rates and requirements, or for that matter price. It’s all about our confidence in the market, and most people don’t like what they see. Until things start stabilizing, the rates could be at 2% and a larger number of homes still wouldn’t sell. There isn’t a buyer for every home that’s for sale.

    This NAR style sales pitch doesn’t resonate anymore. People see through it.

    Tell us when isn’t it a good time to buy a home, then we’ll see that you’re not just looking for a convenient sales pitch to push some self serving view.

    I for one am finding it harder each day to re-visit this site. Maybe this is food for your base readershipb but if it’s always a great time to own a home, then why are there so many unhappy homeowners out there.

    Reply
  2. Karen
    Karen says:

    I find the 4 reasons to buy to be very true. They are good reasons to consider buying. AND yes, I am a real estate agent in Richmond, VA. 1. The interest rates have gained about 1/2 % since some points earlier this year. They are expected to increase. For a 1% increase in interest rates, you get 10% less house! And housing prices are not still dropping…certainly not by that big of a percentage. When interest rates rise – only the BANK gets MORE!

    2. I have heard from others sources that they may eliminate the 30 yr mortgage…maybe maybe not.

    3. Lending rules and practices have been changing and getting tougher. It is just a matter of how much is the rate going to be for the restrictions in place. – costing you more.

    4. And yes ! Rents are going up…and getting past the mortgage payment.

    Confidence in the market!! Richmond is definitely coming up! I sold a house in the fan in 3 days with 2 contracts. Now those people are going up against another couple to get a house…again dual contracts! And we have seen alot more million dollar houses moving. The market is moving so you should too.

    Reply
  3. Steve Harney
    Steve Harney says:

    @Lilly,

    I understand your concern. However, I do believe NOW is the time to buy. My 27-year-old son just purchased his first home. I wouldn’t have helped him make that decision if I didn’t believe it was in his best interest.

    As far as the feelings of homeowners, the latest Fannie Mae survey (January 2011) showed 96% of homeowners still see owning a home as being a positive experience. Most homeowners are happy not unhappy.

    Reply
  4. John
    John says:

    According to Kiyosaki, an asset is anything that flows CASH IN our pockets and a liability is anything that flows CASH OUT of our pockets. A home is a liability, unless it bring in an income, Like rentals and something to keep your eyes one will the home owner tax brakes be around , I heard they are trying to get rid of them. Rich Dad Poor Dad great book…. :)

    Reply
  5. Ruthmarie
    Ruthmarie says:

    First – Kiyosaki is a fraud. Plain and simple. He never had a poor Dad or a Rich Dad. I read his books – long on platitudes short on substance.

    Having said that there is nothing more volatile than renting. If you can afford it – buying makes more sense. Why?

    Rent is just throwing money out the window. You bought a month of shelter and have nothing to show for it after that. Around here the average 1 BR rental is $1800 a month – that’s close to $26k a year. I bought my home for $250k 14 years ago and pay about that to live there. BUT – I have a bout $150k loan on it – and it is still worth about $450k – and every month I’m paring down that principal. The interest on the mortgage is deductible. So who is in better shape at the end of the day? The person who has been shoveling out the rent money for 14 years or me? I get rid of my house I walk away with $300k – a renter walks away with NOTHING.

    Housing markets are cyclic. But the best time to buy is when everyone else is scared. That’s when I bought my house. A house for $250k in my area was only possible during that trough in the mid-90s. I lost money on the home during the first two years…so what????? Look what I gained later.

    Reply
  6. Landlord India
    Landlord India says:

    Hi,

    Very nice blog.there are some reasons and Now Is the best time to buy a home.
    1-Home Buyer Tax Credits
    2-Mortgage Interest Rates Are At 40-Year Lows
    3-Home Prices Are At Generational Lows
    4-Highly motivated sellers
    5-Record low interest rates
    6-Payment Protection
    7-Sales Tax Deduction etc.
    many reasons behind that.but your blog given the good information.Provide the some information in site-http://www.landlordindia.com/

    Reply

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