Is Now the Time to Buy a House?

If you’re planning on purchasing a new home or refinancing your mortgage, now could be the time to take advantage of low rates.
 
More than a year into the COVID-19 pandemic, mortgage rates continue to hover around historic lows which, along with a scarcity for properties and pressure from people looking to relocate, has caused a massive surge in mortgage applications, propelling home sales to a record 14-year high.
 
The question still remains: is now a good time to buy?
 
Mortgage rates are likely to stay low during 2021, but the current economy has made lenders tighten their applications and implement stricter rules for credit scores.
 
The current rise of home prices is likely to go down at some point, making the waiting game a better strategy for someone who isn’t necessarily in need of a new home right now. Our advice is to lay low and prepare to buy when the time is right.

 Mortgages 101
The two most common types of mortgages are 30 and 15-year fixed rate mortgages. With these types of loans, your interest and monthly payments will remain the same throughout the entirety of the loan.
 
For new homebuyers, the main difference between the two is lower rates for 15-year and lower monthly payments for 30-year loans.
 
Aside from the two above-mentioned loans, aspiring homeowners can also choose an adjustable-rate mortgage, which fixes your interest and monthly payments during the first few years of the loan, after which the rates will reset at specific intervals, according to the market.

The main advantage of ARMs is that they are considerably cheaper than fixed-rate mortgages, at least for the first few years of the loan, but they can also prove a double-edged sword should interest rates rise during the life of the loan.
 
With Money’s Home Affordability Calculator, you can begin figuring out how much “house” you can afford using your proposed budget or debt-to-income ratio: https://money.com/how-much-house-can-i-afford/
 
Current Mortgage Rates—Where are we headed?
Mortgage rates sunk deep during 2020, igniting a wave of refinance activity and purchases throughout the country. Many people were able to purchase homes they may have not been able to afford if rates had stayed the same.
 
Starting in January 2021, rates have started to trend higher week-over-week, but experts estimate that the change will be a modest one throughout the year, and it won’t happen overnight.
 
Increased vaccination efforts and government relief packages could even spur more positive activity and lower rates. Even with rising rates, now will still be an advantageous time to refinance or purchase a new home.
 
Things to Consider as You Prepare
Buying a home is a lot more than just rates and fees. Becoming familiar with the process and knowing the difference between common mortgage terms can help you prepare for closing on your dream home.
 
Closing costs can range anywhere from 4% to 8% of the total purchase price and vary across states. Included among these is your homeowner’s insurance policy, which is typically included in your monthly mortgage payments but is paid to your insurance carrier instead of your lender.
 
Although certain lenders allow buyers to finance them along with the mortgage, here are some closing costs you can expect to put down on the day of closing:

1. Real estate fees:
   1. Commissions: although it’s typically the seller’s responsibility to pay the real estate agent/agency, it’s deducted from the sales’ proceeds.
   2. Attorney: also paid by the seller
2. Property fees:
   1. Taxes: if not paid in full at the time of closing, the seller then credit the buyer for the amount of days he owned the property that year, reducing the amount of money the buyer needs at closing.
   2. Appraisal fees: verifies that the property value is worth the amount you’re requesting from the lender.
   3. Home inspections: used to make sure the home is structurally sound and safe to live in.
3. Mortgage fees: application fees with the lender
   1. Origination and discount points: compensates the lender for their work and lowers the interest rate.
   2. Insurance fees: insurance application fees, PMI, FHA, VA, and USDA fees.
4. Down payment: a portion of the sales price you pay to the seller at closing.​

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There is no universal mortgage rate for everyone. Many different factors in the current market and your personal financial situation will determine your outcome but taking ample time to choose the right lender will help you the most in achieving your desired payments.

​If you want to learn more about the current real estate market, click here to read our blog post on Brian Buffini and Dr. Lawrence Yun's Mid-Year Industry and Market Update.