You see advertisements all over for ″super low″ interest rates for mortgages . These low rates are tempting and make you think if this is a good time to buy a house, especially considering that a mortgage payment would be lower than many people’s rent payments at those rates. However, simply because you see a low interest rate doesn’t mean that you are going to get it. Walking into any bank will prove that the introductory offer rates don’t extend to just anyone. There are also considerations that you need to think of in your personal life. If you’re moving soon, if you can afford property taxes, or if you are going to start a family should all be things you’re thinking of when you’re deciding if it is a good time to buy a first home
Parameters to consider to judge if it is a good time to buy a house
What Rate Will You Get?
While you will walk into a bank with the interest rates below 2% in your mind, the reality is that you may not qualify for a rate that low. For example, Kemba Financial Credit Union reported that certain borrower qualifications had to be met before you could get their lower rates. This includes having a certain debt to income ratio (your debts must be less than your assets) and a certain income ratio (typically banks want you to be able to have a certain level of income on top of your assets before you get the better rates) before they allow you take the best rates. The rate, obviously, determines your payment, so you need to make sure that you can afford a higher payment. If you do not qualify for those low interest rates, it may not be a good time to a buy a house
Can You Afford the Fees?
Taxes, insurance, and other fees make up a huge part of a payment for your mortgage. You also will have to consider property taxes and possibly Home Owners Association fees. These things are not included when you are told the base price monthly for your mortgage. In fact, many lenders are hesitant to give you a full calculation of your payment. If you can’t get a straight answer, it’s a sign to leave and go with another lender. Fees can sometimes double the price of your payment, driving it past what many borrowers can comfortably afford. Mortgage interest rates will always be in flux, you should not feel pressured to buy a home now. Wait until you are certain you can afford it. The best idea is to keep your mortgage payment to one quarter of your monthly income and when you can meet that target that could be a good time to buy a house
Will You be Moving?
Because the fees and taxes hit hard on the front end of your mortgage you’re not really starting to pay on the balance itself until about five years into the payment term. Because of this, you will typically be at a loss if you end up having to sell before then. It is considered best practice to not buy or refinance your home until you are certain that you will be in one place for more than five years. That way when you sell you are going to have a greater chance of turning a profit.
In the end, if you’re looking for a good time to buy a house you need to be certain that it will fit in your life currently. Make sure that you can afford the fees, rates, and other expenses that can be hidden into your basic mortgage. Also be sure that you’re going to get your money’s worth out of the property before you buy it. If you’re going to be moving soon, you may as well just rent.