Ok, it’s easy enough to say when the rates are low, it’s a good time to buy. But the big questions these days seems to be, “Will the rates keep going down?” and “Is now really the best time to buy?” The basic answer: “I don’t know”. That doesn’t help you much, does it?
So will rates keep going down? Rates are currently sitting at historical lows, hovering in the low to mid 4’s for 30-year fixed loans: http://money.cnn.com/2011/08/11/real_estate/mortgage_rates_record/index.htm?iid=EL).
What that translates to is huge savings on interest payments over the life of the loan. But how many of you will really pay off an entire mortgage? Are you planning on staying in your home for 30 years? Living in the DC Metro area, I think the safe answer here is that most homeowners do not stay put for 30 years and shouldn’t really be thinking that long term. You need to think in terms of your monthly savings – what is an affordable payment for my family and me that allows us to have a wonderful home and still maintain some life outside of the house – I.e., don’t allow yourself to be house-poor.
- Prioritize your needs and figure out just how much you need/want in your new home.
- Get cost estimates from Builders to learn how much that wonderful home is going to cost.
- Know what your target monthly payment needs to be.
- Have your lender tell you where the rate needs to be in order to achieve your goal.
- BUY NOW if all the stars align and today’s rates get you what you want!
You may need to adjust your needs/wants list to be realistic but this is the only way to start your search and make your decision. If your wish list and today’s rates don’t get you what you want, learn to make some tough choices on what you really “need”. If your wish list and today’s rates get you your desired payment, why wait?
You don’t want to lose that dream house because you thought the rates MIGHT go down a little more and the Builder MIGHT give a better incentive…when you do the numbers, you will find that the monthly savings are not going to get significantly better with the rate dropping by 1/8% or the price dropping by $10,000. And if something significant does change – REFINANCE!
When it comes to concrete numbers, I am not your financial advisor or mortgage lender. However, when it comes to your buying decision, I am telling you what I’ve told hundreds of buyers before you…look at YOUR scenario and future goals and don’t worry about the rest – none of us have a crystal ball!