I have been asked this question a lot here lately. “We were thinking of buying next year, what are your thought?” or “We are going to wait until next year to buy”. My response is always the same… “If it were going to cost you thousands of dollars more to wait until next year to buy a home, would you still have to wait?” Let me explain…
A recent study done by corelogic predicts home prices to rise by 4.3% over the next 12 months. For example the home you are looking at now that costs $200,000.00 will sell for $208,600.00 this time next year. Now that may not seem that high of a jump in price (roughly an increase of $50.00 in monthly payments on a 30 year note), However; debt to income ratios are becoming more strict and this could cause you to not be qualified for your dream home!
Not only will home prices increase, but interest rates are to rise as well. Freddie Mac recently reported that interest rates are set to rise to 5.1% by the year 2019. This has a HUGE impact on your monthly payment! Rates right now are fluctuating around the 4.3-4.5% mark. With todays interest rates, a monthly payment (before taxes and insurance are packaged in) on a $200,000.00 home is estimated at a monthly payment of $1,013.00 (based on 4.5% interest rate). If rates were to jump to 5.1%, the monthly payment would jump to $1,086.00, an estimated increase of $73.00.
The home you have your eye on today, would cost you another $125.00 a month or more this time next year with a rise in home prices and interest rates. REMEMBER, you are not getting approved for an amount of money loaned, but rather a monthly payment. Home prices and interest rates effect that monthly payment. Buying now locks you in at a lower interest rate than predicted and insures you won’t be paying more for the same home next year!
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