[vc_row][vc_column][vc_column_text]Many people are currently trying to decide if now is the right the time to buy a home. Some are homeowners who have realized that their current home no longer fits their needs. Others are renters who are ready to become homeowners but are unsure if buying right now makes sense.
Both parties need to ask two simple questions to determine if they should buy now or wait another year. That is “Do I think home values will be higher a year from now? And “Do I think mortgage rates will be higher a year from now?”
Let’s discuss the answers to these questions.
What will home prices look like in a year?
The expectation from the major industry forecasters is home prices will increase by 7.7%. Let’s take a house that’s valued today at $325,000 as an example.
If the buyer makes a 10% down payment ($32,500), they’ll end up borrowing $292,500 for their mortgage. Applying the projected percentage of home price appreciation, that house will cost $350,025 next year.
Therefore, as a result of rising home prices alone, a prospective buyer will have to put down additional funds and borrow an additional $22,523 just by delaying their move for a year.
What will mortgage rates look like in a year?
Mortgage rates are hovering around 3% today. Most experts believe mortgage rates will rise as the economy continues to recover. Any increase in the mortgage rate will also increase a purchaser’s cost.
At this point in time, the projections average out to 3.6%, a .6% increase from where they are today.
What if home values and mortgage rates increase?
If both of these values increase, A buyer will pay more in mortgage payments each month.
If we assume that a buyer purchases a $325,000 home this year with a 30-year fixed-rate loan at 3% after making a 10% down payment, their monthly principal and interest payment would be $1,233.
That same home one year from now could be $350,025, and the mortgage rate could be 3.6%. That monthly principal and interest payment, after putting down 10%, totals $1,432. That’s $2,388 more per year!
When asking when the right time is to buy, the financial benefits make it clear that doing so now makes more sense than waiting until next year.
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