5 Reasons to Buy a New Home Now
The news from the real estate market seems grim. Property values are falling and mortgage foreclosures are rising. Buyers have gone into hibernation. Believe it or not, all of this makes it a good time to buy a new home.
If that seems to go against logic, ask yourself this: aren't you glad you didn't buy at the peak of the real estate boom? Clearly, buying when housing was wildly popular would have been bad timing--property values were over-inflated and heading for a fall. So it is precisely when home buying is out of favor that reasonable property values are most likely to be found.
New Homes Now: Why Buy?
For many, now is the time to buy. Here is a combination of factors that begs to be taken advantage of:
- Property values have become more reasonable. According to an index of 20 major metropolitan areas, property values have fallen some 16.6% since their peak. In some areas, the decline exceeds 20%.
- Buyers have bargaining power. Besides lowering their prices, sellers have found they have to make other concessions to close a deal. Whether it's paying the closing costs or throwing in some new appliances, there are extras that buyers are in position to negotiate.
- New home loan providers are anxious to find qualified borrowers. While lenders have tightened new home loan qualification standards, they are also eager to make up for the bad loans they now have on the books by making new home loans to qualified borrowers.
- Mortgage rates are relatively low. Historically, mortgage rates have ranged from 5.23% to 18.45%. At recent levels just above 6%, mortgage rates are at the low end of that range.
- There's no guarantee that affordable conditions will last. If you can afford a new home at current property values and mortgage rates it might be wise to take advantage of that. You can't be sure of finding conditions as favorable next year.
New Homes Now: Why Wait?
While there are good reasons to buy now, that doesn't mean you should jump in blindly. Take care of the following tasks before you start dragging your family through open houses every weekend:
- Budget before you borrow. Understand how your new home loan payments will fit your budget--and whether those payments are subject to change. A mortgage calculator is a great tool for determining your potential home loan payment.
- Buy for the long run. Don't expect to be able to "flip" your house for a profit in the near future. Buy to have a place to live, not to make a quick buck.
- Save up for a solid down payment. Bigger down payments can improve your chance of getting a loan, especially if your credit rating is a little shaky. Or you might want to pay off some debt or add to your savings for extra security before buying your home.
- Fix up your credit rating. Interest rates for borrowers with bad credit can be 3 or more percent higher than those for borrowers with good credit. Pay on time to show you've cleaned up your act.
- Shop around for your new home loan. This can result in substantial savings on interest rates and closing costs and is easy to do online.
So don't let the newsmongers scare you. If your situation makes you a good candidate for home ownership you may not see a better opportunity than now.
Sources:
Wall Street Journal
Fannie Mae
Standard & Poors
Freddie Mac
