June 15th, 2021
Many are wondering if now is the best time to buy a house or if waiting is the answer. Renters are thinking about purchasing a home instead of renting and some homeowners are realizing their current home is no longer meeting their needs. Questions such as “will home values be higher a year from now?” and “will mortgage rates be higher a year from now?” are frequently being asked.
Here is what we know:
Where will home prices be a year from now?
Recent projections have shown that prices will likely increase by 7.7%. Let’s look at an example:
If the buyer makes a 10% down payment ($32,500), they’ll end up borrowing $292,500 for their mortgage. Applying the projected rate of home price appreciation, that same house will cost $350,025 next year. With a 10% down payment ($35,003), they’d then have to borrow $315,022.
Therefore, as a result of rising home prices alone, a prospective buyer will have to put down an additional $2,503 and borrow an additional $22,523 just for waiting a year to make their move.
Where will mortgage rates be a year from now?
Currently, mortgage rates are around 3%, however, experts believe that they will rise as the economy continues to change.
Take a look at the forecasts for quarter 1 of 2022 from four major entities:
Freddie Mac – 3.5%
Fannie Mae – 3.5%
National Association of Realtors – 3.5%
Mortgage Bankers Association – 3.9%
The average of these four projections is 3.6%, which is an increase from what we are currently seeing today.
So what does this mean?
So what does this mean if home prices and mortgage rates are increasing? Let’s look at an example: A buyer who purchases a $325,000 home this year with a 30-year fixed-rate loan at 3% with a 10% down payment has a monthly principal and interest payment of $1,233. That same home one year from now could be $350,025, and the mortgage rate could be 3.6%. That monthly principal and interest payment, after putting down 10%, totals $1,432. The difference in the monthly mortgage payment would be $199, which is $2,388 more per year and $71,640 over the life of the loan.
If you are in the market to purchase a home, do not wait! Our team would love to connect with you and help you through this process. Please do not hesitate to reach out to us if you have any questions!
Source: Keeping Current Matters