Seven Reasons To Buy Your First Home Today

This is an interesting article that I think articulates well the current market we are in.  We can debate the last item but there is no doubt in my mind that at some point homes will appreciate again.

Source: The Real Estate Professional
Date: May/June 2009
Author: Julie Garton-Good

If you’re a potential first-time home-buyer who’s been sitting on the fence, now may be the golden moment to take the leap.  In fact, there are at least seven good reasons why buying your first home now makes good financial sense.

#1: Softened Prices Increase Home Affordability

The most current survey on home affordability from the National Association of Realtors brings great news – more buyers are able to financially afford to purchase a home today.  The survey shows that, in order to purchase the average median priced home of $164,600, a buyer would only need qualifying annual income of $34,416.  This is based on a 20% down payment, a monthly principal and interest payment of $717 and a mortgage rate of 5.1%.  While softened prices haven’t been good news for sellers, they definitely benefit first-time buyers, boosting your ability to qualify.

#2: Low Interest Rates

With interest rates lower then they’ve been in more than forty years, now’s an excellent time to lock in a long-term fixed rate.  Not only will you be able to afford more home, but you’ll have the peace of mind knowing that you’ve made a sound financial decision taking advantage of historically low, bargain basement rates.  One thing we know for sure: At some point in time, interest rates will rise; and that factor alone could disqualify you for the mortgage you need.

#3 : Large Inventory to Choose From

Combine low prices, low interest, with large inventory and it’s a buyers’ paradise!  In markets of the past, many first-time buyers were relegated to buying a very small, almost cramped, starter home.  With inventory high in many parts of the country, you’ll be able to select a home that exceeds your first-home expectations.  But caution:  Don’t be like a kid in a candy store spending so much time searching that you miss this great buyer’s market opportunity!

#4:  An $8,000 Tax Credit Bonus

If you’re a first-time home buyer making a purchase before, December 1, 2009, you’ll receive a tax credit of 10 percent of the purchase price, up to a maximum of $8,000.  Unlike previous home-buyer tax credits, this one is refundable … meaning that the credit can be claimed even if you have little or no federal income tax liability to offset.  For example, if you had a tax liability of $2,000 and receive a tax credit of $8,000, Uncle Sam would send you a check for a whopping $6,000.  Who says it doesn’t pay to buy now?

#5: Mortgages May Cost More in the Future

The mortgage meltdown of the past two years has caused lenders to re-think their risk/reward positions, causing additional costs to be added to many mortgage programs.  It’s likely that this trend will continue.  In fact, potential changes coming to the Federal Housing Administration loan programs may have a far-reaching impact.  Just as Fannie-Mae and Freddie-Mac in the secondary market required bailing out of the federal government, it appears that FHA may be next.  Foreclosures have stripped away their insurance reserves, leaving them in a financially vulnerable position.  This could result in higher mortgage insurance premiums for borrowers, more closing costs, and tougher qualifying all around.  No matter which mortgage loan you choose to finance your first home, now’s the time to buy while loan costs are still affordable.

#6: If you’re Pre-Approved to Buy, Act Now

It’s funny how just one little glitch in your life can separate you from buying a home.  So if you’re employed, have an acceptable credit score, and enough cash for a down payment and closing costs, it makes sense to make your move while you’re pre-approved for a loan.  And remember, once you make loan application, don’t mess up your chances of getting the loan by buying a big ticket item (like a car), opening new lines of credit/credit cards, and/or moving large sums of money from one account to another.  The key is to keep your financial picture the same, all the way to the closing table.  Changes can throw up “red flags” to the lender, requiring new documentation, more processing time, and even perhaps resulting in a lost purchase.

#7: Home Ownership Creates Long-Term Financial Stability

Historically, Americans who purchase their own home create greater long-term financial stability then those who don’t own a home.  The key: it’s all in the appreciation.  Here’s an example.  Say you purchase a home for $150,000 today.  Even with meager annualized appreciation of 3 percent, in one year, that house would appreciate to $154,500 to $159,135 the next, and 163,909 by the end of the third year of ownership.  In other words, appreciation and the compounding affect of building equity made you $13,909 richer just by buying today.

Sure.  Buying your first home is a big step.  But with so many positive market factors in your favor, and with the help of a great agent, doesn’t it make sense to empower your financial future and purchase your first home today?