The Number 1 Reason to Buy a Home Now!

By
Mortgage and Lending with America's Mortgage LLC

The number one reason to buy a home right now may surprise you. The number one reason to buy a home now is NOT that the first time home buyer tax credit or the repeat home buyer tax credit is ending this spring. However, both of those are good reasons to buy a home right away.

The number one reason to buy a home NOW is found in the following quote from last week--

"April 1 will be the first day that the Federal Reserve will end its debt purchase program and allow the struggling U.S. mortgage market to operate unassisted. As a result, the Fed believes mortgage rates will rise about three-quarters of a percent to about 6 percent," Boston Fed President Eric Rosengren said recently.

Here is the projected economic impact if you a buy a home in April or later according to the Fed-
· If you buy a $200,000 home with a FHA loan and put 3.50% down your monthly payment just increased by $93 a month or $1,120 a year! That's equal to eating out 4 times a month at Chili's and their 3 Courses for $20 Menu.

· Your monthly payment increase is 8.6%, this is equal to every home seller in the country raising their prices by 8.6%. Yuck!

· Finally, if your debt-to-income ratios are really tight your pre-approval for a home price of $200k, just got decreased to $182,800.

· Or if your pre-approval is good for a price of $175k, it just got decreased to $159,950.

· Or if your pre-approval is good for a price of $150k, it just got decreased to $137,100.

So, how do you avoid this from happening to you? First, you could hope or pray that the Fed will extend their purchases of mortgage bonds. Second, you could buy a home BEFORE the Fed's purchase plan expires on March 31st.

It's your choice. You have been warned.

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Re-Blogged 13 times:

Re-Blogged By Re-Blogged At
  1. David Krichmar 01/19/2010 10:43 AM
  2. Rebecca Gaujot, RealtorĀ® 01/19/2010 10:58 AM
  3. David J. Lampe 01/19/2010 11:14 AM
  4. Debbie Rumsey 01/19/2010 11:29 AM
  5. Cheryl Ritchie 01/19/2010 12:07 PM
  6. Todd & Devona Garrigus 01/19/2010 01:31 PM
  7. Lori Cain 01/19/2010 02:35 PM
  8. Christine Donovan 01/19/2010 03:25 PM
  9. Bonnie Vaughan 01/20/2010 12:49 AM
  10. DeJohnette Lewis 01/20/2010 12:59 AM
  11. Erica Ramus 01/20/2010 04:48 AM
  12. Michelle Gibson 01/23/2010 01:27 PM
  13. Lisa Schlitz 01/24/2010 09:35 PM
Topic:
Lending / Financial
Location:
Colorado
Tags:
buy home now
mortgage rates rising

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Rainmaker
612,664
Todd & Devona Garrigus
Garrigus Real Estate - Beaumont, CA
Broker / REALTORSĀ®

Great post. I think people would be wise to heed your warning!! Thanks!

www.GarrigusRealEstate.com

 

Jan 19, 2010 01:31 PM #18
Anonymous
Lonnie Glessner

I wonder too if mortgage rates will go higher than 6%, because who is going to buy 80% of the mortgage bonds that the Fed has been buying? I would not be surprised that Bernanke, Geithner, and others have been "twisting some arms" or will be to get banks to begin buying mortgage bonds. However, there is a problem with that. First, the Treasury needs the banks to be buying their Treasury bills and Treasury bonds too. The banks don't have enough money to buy Treasury securities, mortgage bonds, approve short sales, foreclose on homes, pay additional taxes or fees, and comply with all the new regulations.

Maybe consumers as investors might begin a lot more mortgage backed securities. But, I highly doubt that right now.

However, there is disagreement at the Fed over this policy and I would LOVE to be a fly on the wall next week at the Fed Meeting. We could see a quick reversal next week on this policy or come April as the Fed watches mortgage rates rise.

Jan 19, 2010 02:00 PM #19
Ambassador
1,278,733
Jason Crouch
Austin Texas Homes, LLC - Austin, TX
Broker - Austin Texas Real Estate (512-796-7653)

Lonnie - Nicely stated and laid out here.  I like the fact that you used concrete examples to illustrate the difference with regard to qualification and pricing. 

Jan 19, 2010 02:08 PM #20
Rainmaker
564,104
Chris Olsen
Olsen Ziegler Realty - Cleveland, OH
Broker Owner Cleveland Ohio Real Estate

Hi Lonnie -- If this occurs, inventory levels should rise and sales prices should fall, generally speaking, knowing that each market and submarket is unique.

Jan 19, 2010 02:16 PM #21
Rainmaker
546,148
Lori Cain
eXp Realty - Tulsa, OK
Midtown Tulsa Real Estate Top Producer

Thanks for excellent post - am going to re-blog. I also liked Tim's comment #13.

Jan 19, 2010 02:34 PM #22
Rainmaker
1,862,575
Michael J. Perry
KW Elite - Lancaster, PA
Lancaster, PA Relo Specialist

Lonnie, thanks for the wakeup call. this won't be an April Fools joke !

Jan 19, 2010 02:41 PM #23
Ambassador
2,010,972
Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M

This is really important information for buyers to realize as they consider whether or not to purchase a home.

Jan 19, 2010 02:59 PM #24
Rainer
57,257
Deborah Engel
Prudential California Realty - San Diego, CA
San Diego Homes & Property

This is awesome!  So many people focus on the dollar amount up front rather than figure out that interest rates have more to do with anything.  I agree completely. Thanks for the reminder.

Deb

Jan 19, 2010 04:07 PM #25
Rainer
19,886
Amy Gooden
Allen Tate - Charlotte, NC

Rates have already started to rise a bit. I have buyers right now that are disapointed each week when rates go up another 1/8 of a percent. None of us have a crystal ball but your comments make a lot of sense.

Jan 19, 2010 04:46 PM #26
Rainer
333,602
Frank Castaldini
Compass - San Francisco, CA
Realtor - Homes for Sale in San Francisco

Very good reason to buy now...but the real number one reason is that you need a house now.  Now is always the right time when it's the right time for you.

Jan 19, 2010 09:50 PM #27
Rainer
126,394
Tony Grego, 317-663-4173 #1 Trade Association for Alternative Inv
REISA - 317-663-4173 - Indianapolis, IN

We need to remember that unless your an investor you are selling a home vs. a house. When we use this mind set it is always a great time to buy a home. Yes, it may be a great time to buy a house.

Jan 19, 2010 11:06 PM #28
Rainer
6,275
J. Paul Spica
Spica Real Estate - Byron Center, MI

Excellent article, thanks for sharing

Jan 19, 2010 11:48 PM #29
Rainmaker
233,449
Susan Thompson-Solomons
Berkshire Hathaway Home Services McNelis Group Properties - Solomons, MD
Southern MD Real Estate-Solomons Specialist

You are so right. It's all about affordability. There's a lot of emphasis on price, but I always give interest scenarios at various levels to show what will happen to try to reinforce the importance of "sooner than later". The time to pay for the low rates is coming.

Jan 20, 2010 12:25 AM #30
Rainer
35,540
House Sale Advisors Lancaster and Lebanon Counties PA
House Sale Advisors - Quarryville, PA

Lonnie,

Great post, This is something we all need to consider when advising people who want to wait until later in the year to sell.  As we all know, people don't buy homes based on price, but on monthly payment.

Jan 20, 2010 01:50 AM #31
Anonymous
Leigh

Sure the math is correct but prices are still dropping in my area.  Foreclosures are still hitting the market at a record pace and unemployment is still god awful (U6 near 20%!).  The tax credit expires in spring which has obviously been fueling our market given the numbers in Oct and Nov.  Still got all those upside down folks who are contemplating walking away.

 

In other words I have no problem waiting till next winter.  The lower the prices the go the bigger my downpayment gets %wise.  Heck, I might even be able to pull off a 15 year mortgage.

Jan 20, 2010 03:58 PM #32
Anonymous
Anonymous

Great information to pass onto buyers - thanks for the heads up!

Jan 21, 2010 01:33 AM #33
Anonymous
Mike Barker

Leigh, you're absolutely right. I know that Zillow isn't the best indicator of homes, but the 30 day price changes in most of the homes in my area show -20,000 + !!! I'm saving $20 grand a month by renting.

 

I'll take higher rates. That'll just cause prices to drop even more. I'm an all cash buyer anyways.

Jan 21, 2010 12:16 PM #34
Rainer
1,993
Leigh V
Potential Buyer - Portland, OR

Mike, I like Zillow in that I compare it to itself if you know what I mean, ie watchin individual homes.  Have you ever tried Cyberhomes.com?

 

Portland area is still way over priced, IMHO.  I make very good money yet still can't afford a decent home?!?!?!   Portland didn't have a big subprime market but the Alt-A's, oh, boy! I guess you'd call it the second wave in some areas but we seem to have a slow building first wave here.   And our unemployment is some of the worse in the nation.  High tech was a big draw but now we aren't even listed in the top ten cities for high tech:O(  I love the beautiful NW, plan to stay, and look forward to reasonable home prices.  It got crazy here and wouldn't mind if Portland lost some of it's 'cool and hip' reputation.

 

Good luck with your home shopping experience.  Patience.:O)

Jan 21, 2010 03:23 PM #35
Rainer
112,731
Lisa Schlitz
Home Run Real Estate, Inc. - Wellington, FL
Realtor - Wellington, Florida Homes 561-214-3216

Thanks for this information. Going to re-blog for all my future clients!

Jan 24, 2010 09:35 PM #36
Rainmaker
275,577
Ken Cook
Content, coding, marketing, host. - Marietta, GA
Content Marketer/Creator

Good way to put it Lonnie. I find it a little amusing how so many of the comments are addressing it like you are talking about interest rates ... that's just another thing to add to it. Rates will rise, should rise and should already have risen. How high they will rise and how quickly we do not know but Wise always was more correct than Keynes and we all are certain it will be plaid out in the wallets and bank accounts of Americans quite vividly over the next several months.

One commenter said his mother believes she remembers having an 18% interest rate - yes, that was very possible in the late 70s and early 80s. Could we see them that high again? It is possible. While most of us agree the government should step out of the way and let the market drive the economy they have done such a fantastic job of training the public to trust them and using fear to leverage their Keynesian policies of socialized economics that it will likely take a complete implosion of the market and runaway inflation to open the eyes of the uneducated, untrained masses. 

You have done a good thing here - do more of it. Everyone needs to understand the simple math.

Jan 29, 2010 06:57 AM #37
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