Should I buy a home now or should I wait a bit?
There will be two kinds of folks this summer.Â
*Â Those who will be GLAD they bought a home before the interest rates went up..
*Â And those who WISH they had jumped on buying a home while the getting was good!Â
Let's just say you are looking at buying a home...Â The average price for a home in San Antonio ranges between $145,000 and $160,000.Â Â Some are much higher, some are much lower.. but that is pretty much the average.Â
As of today, the interest rate being offered by our lender with no discount points is 4.5%Â
Let's run a very basic payment difference between now and where we most likely be headed in a few short months..
$145,000Â - Lets say that is the loan amount (Let's say you bought a home with no down payment and somehow got that loan with no mortgage insurance or private mortgage insurance for the sake of the example)
Average tax rate in San Antonio is around 2.7%.Â Let's say for the sake of the example, the home owners insurance policy would run $1100 per year.Â
So...Â in TODAY's market:Â
Loan Amount:Â $145,000
Yearly Taxes:Â $3915.00
Yearly Insurance:Â $1100
At 4.5% interest on a 30 year note... your Principal and Interest payment would be $734.69
Taxes would be $326.25, insurance would be $91.66.
This is a total monthly payment of:Â $1152.61
IF YOU WAIT, and the rates go up as the industry predicts to 5.5%.Â Here is the difference:
Taxes and Insurace stay the same...Â $326.25 plus $91.66.
But the Principal and Interest goes up to $823.29
Total monthly payment is now:Â $1241.21
This is only a difference of $88.60 right?Â No big deal...Â Lets see...Â on a 30 year term, or 360 payments... that works out to $31,896 extra....Â I think I would rather have the new car!Â
If rates jump to 6%, and many think they will...Â the payment jumps to $1287.26..Â which is a difference of $134.65 per month or $48,474 more over the life of the loan..Â
Let's talk about qualifcation...Â This little jump in interest rate is going to keep a lot of people from qualifying for the home they really want....Â or keep folks from being able to buy homes in the neighborhood or school district they would like to be in..Â Â
There are a great many factors...Â but no matter how you slice it...Â If you buy a home for 4.5% interest vs. 6% interest, you will save almost a FULL THIRD of the sticker price on the home!!!Â
$48K is about 1/3rd the cost of a home at $145,000.Â OUCH!Â
There is an old saying...Â "A bird in the hand is worth 2 in the bush"Â
If you KNOW that rates are way down NOW, and that the market is a lot more geared for buyers than sellers...Â which means that the over all sales price will likely be lower..Â Â and that over all, sellers are willing to pay your closing costs for you in order to assist you in buying thier home..Â
WHY NOT TAKE THE BIRD IN THE HAND?Â Â
There is no benefits to waiting.Â Â If your are on the fense...Â it's time to jump off...Â get your loan pre-approved...Â get a list of homes that fit what you are looking for in the area you would like to live in... and go pop some doors open...Â It may save you 1/3rd of the price of the home in interest you will never pay!Â
Jason C Campbell
Realtor / Mortgage Loan Officer
Keller Williams Realty