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With the economy and housing markets still recovering, some potential first-time home buyers might still be on the fence about whether or not now is the time to take the plunge and buy. There are several reasons why now is a great time for Millennials and other first-time home buyers to start building their American Dream.
1. Interest rates are still low, for now.
Today’s historically low interest rates are helping first-time home buyers find affordable housing options. Interest rates have held for several years. And while no one can predict exactly when they will rise, every expert seems to agree that they will, and soon. Average weekly interest rates for a 30-year fixed mortgage remain under 4.5%. But it’s important to keep in mind that interest rates are sensitive to market forces and can change quickly. There’s no indication that rates will suddenly surge upward, but even a slight rate increase can push monthly payments up. This will have a large effect on how much home a buyer can afford, to the point that a buyer might miss out on their first choice for a new home. For example, on a $250,000 home with an FHA loan, at today’s low rate of 3.75% the principal and interest payment would be only $1136.82. if interest rates climb only three-quarters of one percent, to 4.5% which is still historically very low, the payment would rise by over $100 per month! From $1136.82 to $1243.77. That three-quarters of one percent in interest rate causes a 9.4% increase in P&I payment! Which should incentivize anyone to get moving now.
2. Big down payments are not necessary.
In fact, NO down payment loans are an option for many first time homebuyers. While lenders are looking more closely at borrowers today than in recent years, there are many options for purchasing your first home without a 20% down payment. For example, VA offers zero down loans to qualified veterans, USDA offers zero down loans to qualified borrowers in certain areas, and the Federal Housing Administration (FHA) offers loans to first-time home buyers with down payments as low as 3.5%. FHA and USDA loans do require mortgage insurance, but at today’s rates payments are still extremely affordable.
3. Owning a home can help families build wealth and combat rising rents.
For most Americans, home ownership is a primary source of net worth and is an important step in accumulating personal financial assets over the long term. Although property values have declined in some markets, Americans have more than $10.8 trillion of equity in their homes, and for most families, home equity represents the largest share of net worth. At the same time, rent prices continue to climb – 2.8 percent in 2013 – as rental vacancies dropped to their lowest point since 2000, according to a recent report from Harvard University’s Joint Center for Housing Studies. That makes now a great time to start investing in your future – instead of your landlord’s.
If after careful consideration you feel that you are ready to buy a home, your first step should be to contact a mortgage professional to get pre-qualified, to ensure that your home-buying process goes smoothly. Your choices are NOT limited to a conventional bank, in fact we certainly feel that you would be better off with us, or another mortgage specialist, someone that specializes ONLY in mortgages and will be there for you, in person, every step of the way. Getting pre-qualified BEFORE you go home shopping is critical, to ensure that you are looking in the right price range, and also to be ready to jump in with an offer when you find your dream home. Call us today!
Michele is a resident of Chapin, SC. Her and her husband, Ted, have two children. Their son is at Clemson University and their daughter is at Chapin High School. With two children free time is rare, but when she does find some she enjoys tennis, reading, traveling, or just spending time with family and friends.
She has over ten years experience as a loan officer in the mortgage
industry. Michele began her career working for a bank in Tucson AZ where she did
extensive construction financing as well as permanent home financing.
While she enjoyed the security of banking, she made the switch to Mortgage
Options realizing that as a broker she would have the ability to serve her
clients more fully. Our boutique atmosphere allows her to be involved in her client’s transaction from start to finish for a better experience for
everyone, and having a large selection of products and pricing means she can get the best deal for every client and their unique needs.
Michele's greatest professional joy is assisting families realize their dream of home ownership, from their first home to their dream home.
Mortgage Options, Inc. is a licensed mortgage broker NMLS 803458 SC DCA and NMLS 1183586 NC Commissioner of Banks