Buyers, beware of trying to "steal a home."

Everyone wants a really good deal. Buyers today read about how they can "steal a house."
The wise buyer will be careful to not kill a deal because they "cannot steal a house."

Buyers consider the following.

Interest rates are at an all time low.  When rates do go up historically they go up quickly.  Look at what happens to your payment if rates suddenly start rising.

Lets assume you are willing to pay $150,000.

At 5 percent interest  and 20 percent down your payments will be making payments on $120,000 Not including taxes or insurance your payment is $644.19, at 5.5 percent your payment is $681.35 and at  6 percent it is 719.46.  Historically 7 percent interest has been considered an acceptable interest to pay.  At 7 percent your payment will be $798.16.  A two percent increase in interest increase raises your payment more than $154.00. 

On a nicer home priced at $175,000 with 20 percent down your payment without taxes and insurance at 5 percent interest is 751.55 at 7 percent that amount balloons to 931.42.  A difference of $180.00

Another thing that often kills a deal is buyers are not willing to pay more than a certain an amount even if they can afford doing so.  Often a deal is not made because of just a few dollars a month.  Look at the difference of monthly payments in this example.
 Price of home $150,000, 30 year term, 5 percent interest and 20 percent down.  Payment is 644.19
 Price of home $155,000, 30 year term, 5 percent interest and 20 percent down.  Payment is 665.66
Price of home $160,000, 30 year term, 5 percent interest and 20 percent down.  Payment is 687.13
Price of home $165,000, 30 year term, 5 percent interest and 20 percent down. Payment is 708.60
Price of home $170,000, 30 year term, 5 percent interest and 20 percent down. Payment is 730.08
Price of home $175,000, 30 year term, 5 percent interest and 20 percent down.  Payment is 751.55
Price of home $180,000, 30 year term, 5 percent interest and 20 percent down.  Payment is 773.02
Price of home $185,000, 30 year term, 5 percent interest and 20 percent down.  Payment is 794.50

The difference in payment for every $5,000 increase is less than $22.00.   Does it make sense to give up your "dream home" because your payment will be $22.00 a month more?  Remember if you do wait and interest rates even go up a half percent you will lose almost twice the $22.00 a month. 

Here are some easy ways to save $22.00 a month.  Turn down the thermostat and wear a sweater in the winter.  Turn up the thermostat in the summer.  Make a concerted effort to walk as many places as possible and use half a tank of less gas each month.  Turn the hot water tank down a few degrees and take a shorter shower.  It is easy to save 20 dollars a month just using less water and not using so much hot water.   There are so many ways to easily save twenty dollars a month. 

Good luck home buyers.