When is it a good time to buy a home?
Important interest rate info below. Please read ...
First time homebuyers have been blessed with low mortgage interest rates and the first time homebuyer tax credit. We have heard so many times in the last 12 months that now is a great time to buy. But is this true? So when is it a great time to buy as a first time home buyer or even a regular borrower?
Let me keep it simple. The best time to buy a home is when you are ready to buy. It should not be an impulse, for those that buy when they are sad or happy. Or just because your friend or neighbor bought a house. Or to keep up with the Jones's.
In the last 2 years, buyers have been very lucky with low interest rates in the high 4's to mid 5's and because of the first time home buyers tax credit. What it comes down to is knowing the future and the what ifs. No, I don't have a crystal ball, but the writing could be on the wall. Let's explore some.
The Federal Reserve implemented a plan to help keep mortgage interest rates low. It was a way to keep buyers' fears low and hopefully to help stimulate the economy. Here is a press release from Nov. 2008 - Federal Reserve announcement in buying mortgage-backed securities & GSE's - This was the original plan. What is the plan now? There is news that this plan will come to a halt. And I feel that all buyers and anyone related to the real estate market, should know now and not later. And not be told as it is actually happens.
So what does this all have to do, especially with first time homebuyers? I hate to be the bearer of bad news, but this needs to be talked about and now. Interest rates could climb higher in the next several months or so.
Is time running out to buy a home?
No, time is not running out. People will always buy homes. But it should come with careful consideration and planning. And much of this planning should come from a very knowledgeable loan officer. You should not just buy because you could get a tax credit or because mortgage rates are low.
Here is a question and answer fact sheet put out by the Federal Reserve. FAQs: Purchasing Direct Obligations of Housing-Related GSEs - And here is an excerpt specifically stating the Feds backing out the direct obligations.
Lastly, you have the first time homebuyer tax credit which is due to expire with homes under contract by April 30th, and that close before June 30th. Detailed information on the home buyers tax credit can be found here : Tax Credit for home buyers -
Summary : There should be no need for panic. I wanted to supply information and educate, because if you a serious first time homebuyer or any other type of buyer, you should not be sitting on the fence, waiting for interest rates to drop or home prices to drop even further.
One fear of mine is that we could see rates go up as high as 7% by the end of the 3rd quarter. Let's just play devils advocate and say they go from 5% to 6%. On a $250,000 loan, your payment would go from $1,342.05 to $1,498.88 a month. That is a monthly difference of $156.83. That turns out to be a grand total of $1,881.96 a year.
Again, I don’t believe in negative news to instill fear and or panic. But I do believe that many should be aware of this. If you are a serious buyer, just don’t be caught with your pants down or listening to someone else that might not understand the value of our economic issues.
And keep in mind that you don't need 20% down or credit scores above 700.
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For more information on FHA loans, please go to this link. The FHA Expert
For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit
For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!
Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc