- Personal Finance»
- Mortgages & Loans
Why Now Is The Ideal Time To Purchase a Home
We are in the midst of a recession which means that the last thing that most people are thinking about is buying a new home. However, if you can look at the present situation with an objective eye and then look towards the future with a focus on investment potential then you will realize that now is the ideal time to purchase a home if you can find a way to afford to do so. That’s because we are currently seeing a convergence of two important trends – low fixed mortgage rates and bottomed-out housing prices. It won’t be too long before these trends both begin to change so it’s important to purchase now before those changes occur. Of course, there are definitely drawbacks to strapping yourself to a mortgage in a recession so you’ll need to think carefully about this purchase but it’s a smart investment if you do it correctly.
Lower-than-ever Mortgage Rates
One of the best reasons that now is a great time to purchase a home is because we’re currently seeing lower-than-ever mortgage rates across the nation. These low mortgage rates are due to a combination of things including general trends in the housing and finance industry and recent changes sparked by President Obama’s attention to the mortgage crisis. All predictions seem to indicate that we are not likely to see mortgage rates go lower than they are today. If they do go lower, it is unlikely that they will decrease significantly.
Temporary Low Cost of Housing
At the same time that we are seeing a low rate for mortgages, we are also seeing a low cost of housing. However, it is really important to understand that these low costs are likely to be temporary. The housing market is leveling off. Many of the states that have been selling reduced-cost homes because of bank-owned foreclosure sales are now done with those sales. Future home sales will be traditional real estate sales instead of bank-owned sales which means prices will naturally be higher. Moreover, the housing economy has been re-stimulated which means that competition in the market is going to drive up home values again. This means that right now is the time when home values are likely to be at their lowest.
Convergence of These Two Trends
The convergence of these two trends – low mortgage rates and low housing prices – makes now the ideal time to purchase a home. You probably aren’t going to be able to get better mortgage rates in the future. At the same time, you probably aren’t ever going to see housing prices this low again any time soon. It makes financial sense to purchase a home when these two trends are converged at their best rates.
The Future of These Two Trends
What we’re going to see happen rather quickly is that both mortgage rates and housing prices are likely to increase which makes a home purchase less of a smart move in the future. Good mortgage rates are going to further stimulate the housing economy. This will increase competition in the real estate market. With more people bidding on housing across the nation, home values will rise. This means that the same home that you can get now for $150,000 could be $200,000 in the near future due simply to increased competition in the market. As the housing market changes, mortgage rates may also change.
Good Markets to Buy In
If you are beginning to realize that now is a good time to purchase a home then the next step is to start thinking about which markets are the best markets for this purchase. If you’re buying a home for investment, rather than to live in, then you have a choice of housing across the nation. There are two good markets to look at if you’re making an investment in real estate:
1. Markets with excellent mortgage rates. The first market to consider looking into is a market that offers excellent mortgage rates. Some states have succeeded more than others in offering low-interest long-term fixed-rate mortgages. Connecticut mortgage rates are one example of this. Of course, good rates depend as much on your own credit and location as the location of the lender so you’ll want to shop around to see what’s out there in terms of a good rate on your mortgage loan.
2. Markets with low housing costs that are likely to increase in value over time. The other thing to consider, and perhaps the one that’s more important, is the cost of the home today as compared to the predicted future value of the home. You want to purchase a home in an area where prices are lower than ever before but also in an area where it is likely that the value of homes will rise considerably. Places that people are regularly moving in to (such as major cities in California) but where home values are currently low (San Diego rather than San Francisco) are the places to be looking at.
You want to make sure to purchase a home in a market that not only has good mortgage rates but that will give you the most for your money in terms of housing costs and values. For example, CT mortgage rates may be low but that doesn’t matter too much if housing costs there are high or if the value of homes there is unlikely to rise. (This isn’t necessarily the case for Connecticut specifically but an example of what to consider when purchasing a home in today’s economy.)
How to Afford a Home During a Recession
Even if you agree that now is a good time to purchase a home because the real estate investment is a smart one, you may be wondering how you could possibly buy a home today when the economy is in such a bad place. If you’re dealing with difficulties in affording your existing home or problems with unemployment then it may feel like you can’t afford a new home purchase at this time. However, there are things that you can do to afford to make this investment today. Those things include:
• Look into selling your own home and renting a place while you rent out the new property. This is a complex plan but one that may make financial sense. First see if your own home has any value as a sale property. If it does, look into selling this home and moving into a rental that is cheaper than your current mortgage. Next, purchase the new home and rent it out to cover the cost of that mortgage. You’ll be paying the same or less in monthly housing fees as you do now but you’ll have invested in a smart property.
• Look into the reduced rates of mortgages that have long-term payment plans. Many people find that the monthly rates of these mortgages are actually relatively affordable if they’re willing to cut back on some of their other expenses.
• Pull money out of other investments. Real estate can be a really smart investment right now because of the aforementioned convergence of factors. If you have money in other investments, you may want to pull it out and re-invest in smart housing purchases.
• Get personal loans from those people who do have money. Believe it or not, there are some people who are doing okay despite the recession. If you have personal friends or family in your life that fit this bill then you may want to seek them out for a low-interest loan to cover this investment with a plan to re-pay them when the economy improves.
These are just some ideas for affording mortgage payments in today’s economy. The goal is to think about the benefits of this long-term investment and to consider how you can cut back now to make the investment for your future.