I wrote a post late last year regarding one of the possible disadvantages of waiting to buy called Rate Vs. Price Reduction. It was short but sweet so here it is:
"Since the Fed's Mortgage Backed Securities purchase program ended, the markets have seen much more volatile price swings...and rates overall are off their lows. For potential buyers who are waiting to see if home prices come down a little more, that means the wait could cost more money in the long run.
Here is an example: Let's say a home buyer finds a home that he likes for $400,000. The buyer wants a better deal on the home, so he waits until the price has dropped by $10,000. However, during that waiting period, rates increase from 4.25% to 5.00%.
If the buyer planned on putting down 20%, the monthly payments at the lower amount but the higher rate would be about $100 more per month. Over the life of the loan, this buyer would actually pay $36,000 more in interest all to save $2,000 upfront (the difference between 20% of $400,000 and 20% of $390,000).
These are of course just examples. However, home prices are already very affordable...and rates are still low for now - but they did go up anywhere from 0.25% to 0.50% depending on the product in the last couple weeks. In the end, waiting for a home price to reduce may end up costing a buyer much more in the long run."
What do you know, rates clipped over the 5% mark for a bit, although lower now, but FHA is increasing the annual mortgage insurance premium (paid monthly) effective for FHA case numbers assigned on or after April 18, 2011.
This is the same as an interest rate increase! Keep waiting...
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