Purchasing a home will likely be the largest transaction you ever make. With such a big decision, it is important to understand when to buy. So, is it the right time to buy a house? Read on to find out.
Many potential homebuyers attempt to predict if home values are rising or falling while also paying attention to mortgage rates. These can be important metrics to follow when determining if it’s the right time to buy and we’ll take a look at what should be expected going forward, but there is a catch.
30-Year Fixed Rate Mortgages
The 30-year fixed mortgage rates is important because it’s the most stable option for homebuyers. The interest rate will be higher than a 15-year loan (popular for refinancing), but the 30-year fixed presents no risk of future rate change shocks.
The 30-year fixed is currently 3.93% and the 15-year fixed is 3.17, which are both pretty good. This has been somewhat surprising to many people because the Federal Reserve stopped purchasing mortgage-backed securities, which was done to drive down mortgage rates in order to make homes more affordable.
A year ago, the 30-year was 4.23%. The trend has clearly been down, which will lead some people to think that it will continue to go lower. This is definitely possible since steady declines in commodity prices are hinting at deflation. In a deflationary environment rates move lower. However, the biggest names in the market are fully expecting rates to move higher in the future. Consider the following predictions for the 30-year fixed:
The recent decline in long-term rates is probably over. However, rates should stay at very low levels (with the 10-year Treasury note yielding less than 2%) for much of the first half of the year, before starting to pick up around the time of the Federal Reserve’s likely rate increase in June. So right now could be the right time to buy.
The right time to buy is when you can afford it. Don’t attempt to time mortgage rates and home values. They’re almost impossible to predict. If you find the home you want and you can afford to, buy it.
When you do buy that home consider the following money saving tips:
If you plan to resell in the future, don’t buy the biggest and/or most expensive home on the block. These homes usually appreciate the least and present the biggest challenge when attempting to find a seller. The smallest and/or least expensive home on the block often appreciates the most.
Inquire about property taxes, utility costs and home owners association fees.
Hire an inspector prior to purchasing a home. This will cost you hundreds and might save you thousands.
Don’t make any large purchases (car, boat, etc.) or open a new credit card in the six months leading up to your home purchase. This might be seen as an increased risk to your lender.
When you bid for the home you want, base it on comps on a price-per-square-foot basis. Use a specific number which will indicate to the seller that you did your homework in determining the value of the home.
The Bottom Line
There’s a saying on Wall Street: “Don’t try to time the market.” This also applies to real estate. The number one factor is your ability to afford a home without getting in over your head. That said, if you’re looking for an edge, interest rates are near historic lows so now appears to be the right time to buy, at least more than times past.