Is this a good time to buy? Of Course it is! Spoken like a salesman or is it? I get asked this question many times, at parties, at open houses or even at one on one initial consultations. And my answer is Yes, it is. You buy when you qualify. Here is why…
We all learned this simple interest formula during our school years. I know the 7th grade was far long gone, however the formula lives on…
Interest (I) = P(principal)*R(interest rate)*T(time)/100
3%, 4% 5%.. yes these are low interest rates, historically. However a small change means a big impact to a prospective home owner. No a long time ago, the interest rates were 4.5%, Today they are 3.5%. and they may go up to 4.5% anytime. For a non-suspecting person, this may look like a mere 1% jump in the rate, however, for me and my clients, it is actually approx 30% jump in the rate. (4.5-3.5)/3.5 = 29%
Now based on our 7th grade formula, I = PRT, if the interest rate goes up by 30%, your interest payment goes up by 30%. This means if you were planning on paying $3000 in the home interest payment, now you have to pay $3900. That is huge jump! and you may no longer qualify to buy the same home. So buy now while you qualify.
If you are worried about home prices falling after you buy, it will be a paper loss until the market recovers. As long as your payments are affordable, you will continue to call it a home and pay if off once you stay on course.
So….. You buy when you qualify. If the rates go up your payments locked in at the lower rate stay the same and you made a good decision. If rates go down, you can refinance and lower your payments. Now tell me, when is the good time to buy? ITS ALWAYS NOW!
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