I don’t know about you, but if I hear one more commercial or person telling me it’s a great time to buy a house, I think I’m going to scream. It seems like I’ve been hearing that for years… during the boom, during the bust… the mantra never changes. So, being in the real estate industry, I decided to take matters into my own hands. Is it reallya great time to buy a house?
At our NAEBA meeting in DC last week, Barry Zigas, Director of Housing Policy for the Consumer Federation of America told us that now is a “fabulous” time to buy a house, but he mentioned several conditions. First, one has to have great credit. Second, one has to have money for a down payment. Finally, one needs to have the resources to be a responsible home buyer.
OK… but if you’re like me, you want to know why it’s a fabulous time for people who meet those conditions to buy a house. Surprisingly (or not), I found several reasons why now just might be the right time to buy.
1. Low, low, low interest rates. Did I mention the word low? I mean really low. When checking earlier today, I saw rates at 4.375% for a 30-year fixed mortgage (and I’ve seen lower in the past week). Compare that to the 5.875% I’m paying, well, let’s just say that would have saved me almost $75,000 on my modest, 2,000 s.f. Phoenix home. Did I hear someone say refinance? Anyway, the second part to this is that interest rates really can only go one direction from here – up. The U.S. financial system is basically to the point where the interest rate is just barely covering the cost of making the loan. So, my crystal ball doesn’t say when but it does say they will go up.
2. Higher down payments may be on their way. Check out this headline from a recent issue of The Washington Post, “Federal Regulators Propose 20% Down Payment for Best Home Mortgages.” That article or this one from Mortgage News Daily sum it up better than I could ever hope to, but if this passes, let’s just say in a nutshell that either home buyers are going to have to start coming up with 20% down or pay more overall for their conventional mortgage. Plus, while government-backed loans like FHA and VA wouldn’t have the same restrictions, I heard talk in DC about raising the down payment or other costs associated with those as well.
3. Access to credit is tightening. We’ve started to see this already, but in the session with Mr. Zigas, he told us that we are likely to see requirements even stricter when it comes to credit scores. In addition, there will be more attention paid to what’s known in the industry as the “back-end ratio.” Essentially, mortgage companies are going to want borrowers to have higher income and lower overall debt.
If you’re still thinking of sitting on the sidelines, I encourage you to not only research what I’ve said above, but also do research on what experts are saying regarding Fannie Mae and Freddie Mac, mortgage insurance premiums, and the mortgage interest deduction.
Don’t take my word for it. I’m good with that. With just a little research, though, you may just find that now really is a great time to buy that home you’ve always wanted.
-Kimberly Kahl, CAE
NAEBA Executive Director