Experts agree: There's no better time to buy a home than now. Find
out why.
By Lee NelsonMay 28, 2014 12:41 PM
Timing
is everything when it comes to a lot of things - baking a soufflé,
fertilizing your lawn, and buying a home. Not so sure about that last one?
With interest rates going up and housing prices on the rise, you may think
that it might not be the best time to purchase a home or even refinance the
one you've got. But experts disagree.
"It
is a big deal to buy a house. But if you do your homework and have the right
documentation ready, this could be a great time to buy a home for many
reasons," says Jay Plum, executive vice president of Huntington National
Bank, in Cincinnati, Ohio.
Read
on for the five major reasons why mortgage experts believe that there is no
better time than the present to get that dream house you've always wanted.
Reason #1: Interest rates
won't stay this low forever
"A
reason to look now into buying a home or refinancing is because these rates
won't stay [put] forever. That's what rates do - they go up," says Plum.
In
fact, the interest rate for a 30-year fixed mortgage is expected to go up to
5 percent by the fourth quarter of this year and 5.3 percent by the end of
2015, according to a recent forecast by the Mortgage Bankers Association
(MBA).
Why
are rates rising? Well, one huge factor is that the feds will start raising
rates about six months after they stop buying mortgage bonds, which is
projected to happen sometime in 2015, says Plum.
"[Rates]
probably won't start shooting up quickly. But a quarter of a point on an
interest rate can mean about $100 more each month on [a homeowner's] loan.
For a lot of families, that can make a big difference," he says.
Reason
#2: Credit score requirements are lowering
Is
your credit score lower than you'd like to admit? Well, good news: Credit
score requirements for borrowers taking out mortgages are easing.
In March, credit scores on
purchase mortgages stood at 755, down from 761 in the previous year,
according to data from Ellie Mae, a mortgage-software provider. Credit scores
for FHA loans dropped even lower to 684, compared to 696 a year earlier.
What brought on this
change? The 2014 market is expected to be a more purchase-focused market,
says Vickee Adams, vice president of external communications for Wells Fargo
Home Lending.
"Having a broader
credit score range will serve to attract more borrowers into the
market," she explains.
But
why is there a need to attract more borrowers? Well, the demand for refinancing
has dropped considerably. Refinance applications are about 70 percent slower
than a year ago and are expected to continue to decline, according to a
statement by the MBA in April 2014. As a result, banks are trying to find
ways to boost lending to homeowners, including lowering credit score
minimums.
Reason #3: Spring and
summer are the best times to buy a home
It
has been a brutal winter, and people who wanted to sell their house just
didn't want to bother with all the snow and cold weather, says Lawrence Yun,
chief economist for the National Association of Realtors in Washington, D.C.
The same goes for people wanting to buy a home - they just stayed put, he
adds.
"Many
people who were forced to delay putting their house up for sale are doing so
now. But spring has always been an important time in the real estate
business,” Yun says. In fact, warmer seasons like spring and summer have
always been a popular time to buy a home.
People think about moving
during summer vacation, because their kids will be out of school then, which
helps makes things easier, says Yun. Buying a new home in the summer gives
families enough time for the closing and moving before school starts again.
No kids? Summer is still a
popular time to sell or buy even for people without children. And it's not
just because the weather is nicer.
"People
just know that there are more listings coming in the spring and more
buyers," Yun says. "But from a buyer's perspective, there will be
more competition from other buyers."
Reason
#4: Buying is still cheaper than renting
Buying a house is a
significant purchase, but in most parts of the country, it's cheaper than
renting. If that seems counterintuitive, let's look at recent research by
Trulia, an online residential real estate site for home buyers, sellers,
renters and real estate professionals.
According to Trulia,
homeownership compared to renting continues to be the less expensive way to
live in all of the 100 largest metro areas researched. The study compared the
costs of renting and owning assuming homebuyers get a 4.5 percent mortgage
rate on a 30-year fixed term loan with 20 percent down.
So why should people buy a
home now? The gap is getting smaller between the two choices because of
rising mortgage rates and home prices, says Jed Kolko, Trulia's chief
economist and author of the report.
"Now, at a 30-year
fixed rate of 4.5 percent, buying is 38 percent cheaper than renting
nationally, versus being 44 percent cheaper one year ago," Kolko says in
the report. "Some markets might tip in favor of renting this year as
prices continue to rise faster than rents, and if - as most economists expect
- mortgage rates rise, due both to the strengthening of the economy and Fed
tapering."
However, the percentage is
different in every housing market. In Honolulu, buying is only 5 percent
cheaper than renting, while in Detroit, buying is 65 percent cheaper than
renting.
Reason #5: Home values are
still competitive
Are
you looking for a bungalow with a white picket fence, a modern metropolitan
penthouse, or a cabin in the woods? Well, it might be time to buy your dream
abode before prices go too high.
The
good news is that that the prices of homes have gone up but haven't
skyrocketed, so they're still within reach of many buyers. The median
existing home price for all housing types in February 2014 was $189,000,
which is up 9.1 percent from last February, according to recent press release
by the National Association of Realtors (NRA).
Plus,
the housing inventory rose 6.4 percent to 2 million existing homes available
for sale, reports the association. So there are more homes to choose from
during your search depending on where you live.
"Property
values are still very competitive in most markets, but there is a tremendous
amount of competition by buyers," Plum says. "If you are looking at
buying a home, be prepared to offer quickly, and get preapproved by a lender
which will make things go easier."
Courtesy Yahoo! Homes |
Saturday, May 31, 2014
No Better Time to Buy a Home
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