Now or Later?

by | Feb 3, 2010 | How to Guides, Uncategorized

I get asked all the time if you should wait or buy now?

I think now is a great time!
Interest rates under 5%
Tax credit is good till April 30th – Close by June 30th
FHA loans still only 3.5% down

Many people also want to know what I think will happen to the housing market in 2010?

I think prices could soften but not more than 10% – especially in the affordable under $300k range or close-in.
I also think interest rates which are currently at 5% will be around 6% by end of 2010.
Rates going up 1% off set any gains a buyer gets even if prices drop 10% = same monthly payment.
I also do not think they will extend the tax credit past April 30th and for most buyers that’s an $8,000 benefit that will likely be gone if you wait too long.

So what does that mean in simple numbers?

If you bought a 250k house now at 5% interest and qualified for the tax credit your net purchase would be 242k and your payment would be roughly $1,275 if you put 20% down

If rates go to 6% and you want the same payment of $1,275 you have to pay 10% less or $225,000 and there’s no credit either so $8,000 of incentive is gone.

I can’t predict the future but the government is planning on no longer buying mortgage backed securities and when they do it will likely drive rates up.

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