ALL ABOARD – LOW RATES MAY MAKE THIS THE TIME TO BUY
April 21st, 2009 categories: Buyer Strategies, Mortgage & Finance
Many people have been calling to ask if this is a good time to buy a home. Like a person working a ticket booth at a train station, I don’t really know the best destination for you. Of course, having been around the mortgage industry for a while, I’m happy to point out some things on the way, but in the end, I’ll rely on you to decide where 
you want to go. For some people, inevitably the answer is yes, buy a house, even in the worst of markets. For some people, the answer is no, even in the best of markets. It all comes down to your goals in both the short term and the long.
Compared to any other time in the last five years and arguably much longer, this is probably one of the best times to buy. Rates are at historical lows, allowing you as the buyer to buy a lot more house while maintaining a low monthly payment. Couple this with the fact that the high number of foreclosures have driven the market to all time lows, you have a fantastic opportunity for long term gains. But let’s start with the short term and why you may want to buy from a lending standpoint.
Having a mortgage is a good thing. The benefits of buying today can be reaped immediately as you begin to pay tax deductible interest for the roof over your head rather than dumping money down the proverbial hole they call rent. Next, having a mortgage will immediately begin to help your credit score. As long as the payments are made on time, I have seen clients boost their credit by 40-50 points in a six month time frame. Besides paying off large sums of credit card debt, making mortgage payments on time is the single greatest thing you can do to build your score.
Looking at the long term, buying today is probably one of the most financially savvy decisions you can make. Rates will probably not be anywhere near their current levels come 5 years, so buying a home may cost you a lot more if you keep pushing it off. Sometimes it makes more sense to cut down on spending in the short term to be able to afford the payments that will save you far more money down the road. i.e., if you think you cannot afford a mortgage payment now, wait until the market is inflated and prices and rates are up. I can tell you it is far easier to qualify buyers at today’s rates than it will be when they go to seven percent or beyond.
Lastly, Federal Housing Authority (FHA) mortgages today are assumable loans. If you buy your house today and get an FHA loan (about 40%+ of my loans are FHA today), you may be able to demand a larger price for your home. If you have a loan at five percent today and rates go to eight percent, assuming your buyer can qualify, they can take over your loan at the lower rate rather than securing a new loan with a higher rate. Hopefully the savings they realize can demand even more money in your pocket.
It is always important to gauge yourself and make sure you don’t bite off more than you can chew. But it is also important that you start thinking about getting in line to buy that ticket. You don’t want to kick around the station all day with no plan in mind. Get on or stay off, but either way, the train is going to pull away eventually. You don’t want to have any doubt about whether you were supposed to be on it.
