You’ll hear this question come up a lot when you start shopping for a house: Is now really the best time to buy, or should I wait until next month or even next year?
If you’ve asked this question before, then you may have been frustrated by the response you received. Most of the time, the Internet, real estate experts, and even your closest friends skirt around the real issue by talking about the “possibilities” of what could happen in the housing market: fluctuating interest rates, unstable home prices, a housing shortage, a housing bubble that’s about to pop.
Even with all those variables in mind, there could be a clear-cut answer to your question.
The living is easy. Get prequalified for a mortgage online.
Mortgage rates are holding strong
Here’s something interesting you may have picked up by talking to your mortgage lender. Mortgage rates looked good, and even great, in 2016 — staying steadily below 4 percent for a 30-year fixed mortgage, according to Freddie Mac numbers. The UK’s Brexit vote in June 2016 caused mortgage rates to plummet, and homebuyers reaped the benefits.
Then the presidential election took place. This triggered a much-anticipated change in our housing market and our economy. Fast-forward six months, and mortgage rates have stabilized — so much so that they reached a new low in June 2017. Freddie Mac confirms that rates for the 30-year fixed-rate mortgage fell to 3.94 percent.
Watching the mortgage rates is kind of like keeping your eye on a travel deal for an upcoming vacation. If the rate looks pretty good now, and you’re waiting for it to get better, you might wind up kicking yourself when the price spikes by the time you’re ready to buy.
To put it another way, if mortgage rates are the only thing holding you back from buying a house, now could be the time to take the leap. There’s no telling how high mortgage interest rates will be in the next year, but they’re looking great again for the time being.
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“Rates are historically low,” Brenda Avilla-Kintz, a California realtor at Intero Real Estate Services, says. “The biggest mistake I see first-time home buyers make is waiting to save more money to afford a better first house. Nobody likes to move, but often, buyers are misinformed about down payment requirements or want to hold out for a dream home.” In doing this, Avilla-Kintz explains, the market appreciation often outpaces how much they can save. Then, a dream home becomes even more unaffordable.
There’s a possible solution. To buyers who are on the fence or worried about how much they can afford, Avilla-Kintz says, “I advise first-time homebuyers to look at the numbers and see if maybe buying a starter condo or smaller house is a better decision than waiting and getting even more priced out of the market.”
It could be your season
Also akin to travel deals, if you’ve been paying attention to housing prices and mortgage rates, then you’ve probably observed certain fluctuations that occur at different times of the year. We know it’s cheaper to take a Caribbean vacation in the fall compared to summer break. Similarly, off-seasons are considered better to buy a home because, just like vacationing, that’s when competition begins to thin.
“Although spring is almost over (the best season to buy a house), the summer is certainly not out of the question,” Pearce Landry-Wegener, CFP, advisor at Summit Place Financial Advisors, says. “Those seeking a home must be aware that the housing market is currently tight [in some markets and at some price points] – [some] people aren’t putting their properties up for sale. While current mortgage rates are dropping, homebuyers must first ensure they’re financially ready to buy a house.” In all seasons, Landry-Wegener says that factors – such as property taxes, maintenance costs, renovations, etc. – are more important to consider than a slight drop in mortgage rates.
Avilla-Kintz provides her top two tips on how to know when it’s time to buy a house:
- Are your finances in order? The best time to buy is when a buyer’s personal circumstances state this is the case, Landry-Wegener and Avilla-Kintz say. Avilla-Kintz continues, “Do they have funds for a down payment and closing costs? Is their credit good enough to secure a loan?” If a potential buyer is even thinking about buying a home, Avilla-Kintz recommends connecting with a good realtor who can connect them with a lender offering loan products that most suit the buyer’s financial situation and goals. Buyers can also meet with a lender first to get prequalified for a home loan and then request a referral to a reputable realtor.
- Are you planning to stay put? Another factor is the length of time a buyer intends to live in a particular area. “The expenses associated with buying and selling and tax consequences may require that the buyer hold the property for a few years in order to avoid a net loss,” Avilla-Kintz explains.
If you’re a homeowner, there’s still a potential to save money with a home loan refinance. Learn more here.
It helps to be in the know about the current mortgage rates and housing market. Yet real estate is also cyclical. After a few months of waiting, you might find yourself right back where you started. If the mortgage rates look right (as they do now) and you’ve prequalified for a loan with your lender, then the world is your oyster. Get prequalified before you start shopping for a home, and you’ll get an accurate idea of how much you can afford and at what interest rate.
There are three simple ways that you can get prequalified before you start looking for a house:
- In person/over-the-phone. Set up an in-person or phone meeting with your loan officer to find out what loan amount you prequalify for. Your loan officer can answer any questions you might have about mortgage interest rates, loan products and fees, and more.
- You can also input your information to find out what kind of mortgage you prequalify for by using our online form. Once we’ve received your numbers, we’ll contact you to discuss loan amount and details.
- Via your smartphone. Our super-convenient and free LoanFly app has a very important feature. You can submit your information to get prequalified and find out how much house you can afford directly through the app.
Your personal finances can tell you if the time is right, but remember: In the eyes of a seller, a prequalification carries weight and buying power. With a loan prequalification and low interest rates, the odds are in your favor.
For educational purposes only. Please contact your qualified professional for specific guidance.
Sources are deemed reliable but not guaranteed.