You are ready to buy your first home. You have a stable job, a good income and as a result qualify for a mortgage loan. Mortgage rates are still lower than they were two years ago. However, with the economy just coming out of a recession and house prices continuing to fall is this really the right time to buy a new house?
In this current precarious economy and house prices at record lows, new home buyers have a lot of leverage. They can negotiate for things they normally would not otherwise be able to in a stronger housing market. With supply outweighing demand pushing house prices down, sellers are desperate to sell. Buyers can ask sellers for things like closing costs, household improvements or significant reductions in the asking price. There are also other factors that make this a good time to buy.
Affordability is determined by a combination of factors such as low house prices, reduced mortgage interest rates and a good family income. Based on these factors, affordability is the best it has been in 30 years due to a 34% decline in house prices since 2006 and the current low mortgage interest rates.
Low Mortgage Rates
Housing affordability is determined not only by the price of the home but also by the mortgage term. The average rate for the popular 30-year fixed rate mortgage is currently 4.16%. Although current rates are not at the all time low of earlier this year, rates are still very attractive and are not predicted to rise substantially until late 2015.
Beside low mortgage rates, credit unions and banks are also making it easier for some mortgage applicants to qualify for a mortgage due to less stringent requirements and qualifying criteria.
Buying vs. Renting
According to a 2013 Trulia Trends study “buying is still 35% cheaper than renting in all of the 100 largest metros” in the United States. Renting may be the more affordable option for the short term. However, in the long term owning is less costly than renting because of rent spikes, costly moving expenses and rising rental costs. The benefits of buying include: building equity, paying equivalent or less in monthly payments, stabilizing housing expenses over the long term and investing for the future.
Pessimists argue that the housing slump is not over and prices will continue to fall due to excess inventories. However, these naysayers are not taking into account that many of these vacant houses are not on the market. Builders are also offering big discounts to try and clear out inventory.
If home prices fall further and you buy a house for one-third off its fair value instead of 40%, that is still a good deal.
Don’t miss out. If you have been considering buying a new home, have a decent down payment and positive credit, this is a good time to buy. The interest rate on fixed-rate loans is still cheaper than it was a few years ago and at the current rate it’s cheaper to buy a new home than it is to pay rent.
Aurora Financial, a leading financial services company, has funded billions of dollars in loans across the United States and serves clients nationwide in more than 18 states and jurisdictions. A Direct DE FHA Lender, Aurora provides a broad range of financial products and services, including consumer banking and credit, corporate and investment banking. Contact us www.auroraf.com or call 1- (877) 887-1117 to find out if refinancing your home loan to a shorter term makes sense for you