I’m sure anyone that watches the real estate market has heard over the last three years that this is a great time to buy a home. Even with the large drop in home values, qualified buyers have been skeptical about when to buy their home. Everybody wants to know when are we going to hit the bottom? The hope is that by waiting longer they will buy their home at the lowest purchase price possible.
The truth is that there has never been a better time than NOW to buy a home. With mortgage rates hovering around 4%, and recently dipping below 4%, the DEAL you are getting on the loan is just as important as the DEAL on the home. Qualified buyers need to understand the amount of money that will be saved by obtaining their financing at these historically low rates. Let’s look at simple example to paint a better picture.
If you were to purchase a home today for $150,000 with a 4% 30-yr fixed loan, your principal and interest payment would be $716.12 per month (keep in mind for this example there is no down payment taken out of the $150,000 principle). The total amount of interest paid over the life of the loan would be $107,804.26! Shocking……isn’t it.
Now let’s say you wait longer and buy the same house for less at $140,000, but interest rates rise to 6.5% on a 30-yr fixed loan. Your monthly principal and interest payment would rise to $884.90 per month. The total amount of interest paid on this loan would be $178,562.28. That is a difference of paying $70,758.02 more over the life of the loan!
How could paying $10,000 less for the home add up to higher payment, and over $70,000 more paid out in interest over the life of the loan? As you can see the interest rate on your loan can make a HUGE difference over a thirty year period. Interest rates may not shoot up to 6.5% over the next year, but they could very well climb up over 5%. As you can see, the low rates on the home loan can have a bigger impact on your monthly payment than buying the home at a lower price.
So with the combination of current decreased home values, and historically low-interest rates, this is the time to buy a home! Getting into a home today is more affordable than ever. That is why it makes me cringe when I hear of qualified buyers that want to wait for the absolute bottom of the market before they buy. If you are going finance the home purchase than this is it!
If you are a future home buyer and have been waiting it out, then pop me an email or give us a call. There are many great homes and loan programs out there that can get you into your dream home for less than you ever thought possible. I would love to help in any way that I can!
Joe Manausa, MBA is a 26 year veteran of real estate brokerage in Tallahassee, Florida and has owned and managed his own company since 1992. He is a daily blogger with content that focuses on real estate analytics and providing his clients with a tactical advantage in today's challenging market.