Two Reasons Why Waiting To Buy a Home Will Cost You
If you’re a homeowner who’s decided your current house no longer fits your needs, or a renter with a strong desire to become a homeowner, you may be hoping that waiting until next year could mean better market conditions to purchase a home.To determine whether you should buy now or wait another year, you can ask yourself two simple questions:Where will home prices be a year from now?Where will mortgage rates be a year from now?Let’s shed some light on the answers to both of these questions.Where Will Home Prices Be a Year from Now?Three major housing industry entities are projecting ongoing home price appreciation in 2022. Here are their forecasts:Fannie Mae: 7.4%Freddie Mac: 7%Mortgage Bankers Association: 5.1%According to the National Association of Realtors (NAR), the median price of a home today is $353,900. Using an average of the three price projections above (6.5%), a home that sold for $353,900 today would be valued at $376,904 at the end of next year. As a prospective buyer, you would therefore pay an additional $23,004 by waiting.Where Will Mortgage Rates Be a Year from Now?Today, Freddie Mac announced their 30-year fixed mortgage rate was at 3.1%. However, most experts believe mortgage rates will rise as the economy recovers. Here are the forecasts for the fourth quarter of 2022 by the three major entities mentioned above:Fannie Mae: 3.4%Freddie Mac: 3.7%Mortgage Bankers Association: 4%That averages out to 3.7% if you include all three forecasts. Any increase in mortgage rates will increase your costs.What Does It Mean for You if Home Values and Mortgage Rates Increase?If both variables increase, you’ll pay a lot more in mortgage payments each month. Let’s assume you purchase a $353,900 home today with a 30-year fixed-rate loan at 3.1% (the current rate from Freddie Mac) after making a 10% down payment. According to mortgagecalculator.net, your monthly mortgage payment would be approximately $1,360 (this does not include insurance, taxes, and other fees because those vary by location).That same home one year from now could cost $376,904, and the mortgage rate could be 3.7% (based on the industry forecasts mentioned above). Your monthly mortgage payment after putting down 10%, would be approximately $1,561.The difference in your monthly mortgage payment would be $201. That’s $2,412 more per year and $72,360 over the life of the loan.Add to that the approximately $23,004 a house with a similar value would build in home equity this year due to home price appreciation, and the total net worth increase you could gain by buying this year is over $95,364 (the $72,360 mortgage savings plus the $23,004 potential gain in equity if you buy now).Bottom LineWhen asking if you should buy a home, you may think of the non-financial benefits of homeownership. When asking when to buy, the financial benefits make it clear that doing so now is much more advantageous than waiting until next year.
Struggling To Find a Home To Buy? New Construction May Be an Option.
There’s no question that the financial benefits of selling a house are outstanding today. Now is truly a great time to list if you’re ready to make a change. But if you do sell your house right now, you may be wondering where you’ll go when you move.With so few homes available to buy right now, you might be considering building a new home as one of your options. But you may be unsure if that’s the way to go. Let’s compare the benefits of a newly built home versus moving into an existing one, and why working with a real estate agent throughout the process is mission-critical to your success no matter what you decide.The Pros of Newly Built HomesFirst, let’s look at the benefits of purchasing a newly constructed home. With a brand-new home, you’ll be able to:1. Create your perfect home.If you build a home from the ground up, you’ll have the option to select the custom features you want, including appliances, finishes, landscaping, layout, and more.2. Cash-in on energy efficiency.When building a home, you can choose energy-efficient options to help lower your utility costs, protect the environment, and reduce your carbon footprint.3. Minimize the need for repairs.Many builders offer a warranty, so you’ll have peace of mind on unlikely repairs. Plus, you won’t have as many little projects to tackle. QuickenLoans puts it like this: “Buying a new construction vs. existing home typically means you’ll have fewer repairs to do. It can be a huge relief to know that it’s unlikely you’ll have to repair the roof or replace the furnace.”4. Have brand new everything.Another perk of a new home is that nothing in the house is used. It’s all brand new and uniquely yours from day one.The Pros of Existing HomesNow, let’s compare that to the perks that come with buying an existing home. With a pre-existing home, you can:1. Explore a wider variety of home styles and floorplans.With decades of homes to choose from, you’ll have a broader range of floorplans and designs available.2. Join an established neighborhood.Existing homes give you the option to get to know the neighborhood, community, or traffic patterns before you commit.3. Enjoy mature trees and landscaping.Established neighborhoods also have more developed landscaping and trees, which can give you additional privacy and curb appeal. As Investopedia says, if you buy an existing home:“Odds are, too, that the home will have mature landscaping, so you won’t have to worry about starting a lawn, planting shrubs, and waiting for trees to grow.”4. Appreciate that lived-in charm.The character of older homes is hard to reproduce. If you value timeless craftsmanship or design elements, you may prefer an existing home. According to Houseopedia:“Charm is priceless. Existing homes, especially those built in the 1950’s or before, often offer architectural elements, historic charm and a quality of craftsmanship not available in new homes.”The choice is yours. When you start your search for the perfect home, remember that you can go either route – you just need to decide which features and benefits are most important to you. Working with the guidance of your trusted real estate advisor will help you make the most informed and educated decision, so you can move into the home of your dreams.Bottom LineIf you have questions about the options in your area, let’s discuss what’s available and what’s right for you, so you’re ready to make your next move with confidence.
Why It Just Became Much Easier To Buy a Home
Since the pandemic began, Americans have reevaluated the meaning of the word home. That’s led some renters to realize the many benefits of homeownership, including the feelings of security and stability and the financial benefits that come with rising home equity. At the same time, many current homeowners have decided their house no longer meets their needs, so they moved into homes with more space inside and out, including a home office for remote work.However, not every purchaser has been able to fulfill their desire for a new home. Here are two obstacles some homebuyers are facing:The ability to save for a down paymentThe ability to qualify for a mortgage at the current lending standardsThis past week, both of those challenges have been mitigated to some degree for many purchasers. The FHFA (which handles mortgages by Freddie Mac, Fannie Mae, and the Federal Housing Administration) is raising its loan limit for prospective purchasers in 2022. The term used to describe the maximum loan amount they will entertain is the Conforming Loan Limit.What Is the Difference Between a Conforming Loan and a Non-Conforming Loan?Investopedia explains the difference in a recent post:“Conforming loans are the only loans that meet the requirements to be acquired by Fannie Mae and Freddie Mac. Jumbo loans, which exceed the conforming limit, are the most common type of nonconforming loan.”What Difference Does It Make to Me as a Home Buyer?A Forbes article earlier this year explains the benefits of a conforming loan and why they exist:“Since lenders can’t sell non-conforming loans to Fannie Mae or Freddie Mac to free up their cash, they’re a bit riskier for the lender. This is especially true for jumbo loans, which aren’t backed by any government guarantees. If you default on a jumbo loan, it’s a huge blow to the lender.Thus, lenders generally charge higher interest rates to compensate, and they can have even more requirements. For example, lenders who give out jumbo loans often require that you make a down payment of at least 20% and show that you have at least six months’ worth of cash in reserve, if not more.”What Happened Last Week?The FHFA has significantly increased its Conforming Loan Limits for 2022. Sandra L. Thompson, FHFA Acting Director, explains in the press release that:“Compared to previous years, the 2022 Conforming Loan Limits represent a significant increase due to the historic house price appreciation over the last year. While 95 percent of U.S. counties will be subject to the new baseline limit of $647,200, approximately 100 counties will have conforming loan limits approaching $1 million.”This means that more homes now qualify for a conforming loan with lower down payment requirements and easier lending standards – the two challenges holding many buyers back over the last year.The Federal Housing Administration (FHA) also increased its Conforming Loan Limits for 2022. That could also mean an easier path to homeownership for many prospective buyers. As the Forbes article explains:“FHA loans can be very beneficial if you don’t have as much savings, or if your credit score could use some work.”Bottom LineBuying your first or your next home may have just gotten much easier (less stringent qualifying standards) and less expensive (possibly lower mortgage rate). Let’s connect to discuss how these changes may impact you.Resources:To get more information on the new FHFA Conforming Loan Limits, click here.To get more information on the new FHA Conforming Loan Limits, click here.
Categories
Recent Posts
