©fooe2010 - flickr

©fooe2010 – flickr

Is purchasing a property at this time something you think you can afford? I think the best step is to research what your monthly mortgage payments would be on a potential property. Right now lenders are very strict on debt to income ratios and ensuring that would-be borrowers are capable of repaying the loan. Banks are dealing with so many bad loans that have gone into default that they cannot afford to lend with the same risk and loose underwriting standards.

You will have tax incentives to own instead of rent. You will also be able to build some equity and buy into the housing market while prices are depressed. There is a good amount of upside should you be qualified to purchase a property. Just do your homework and make the best decision possible.  Although mortgage rates have inched up slightly with positive moves in the stock market over the past month, rates remain at historic lows, and for qualified borrowers todays market presents a good deal of opportunity.  Rates have plunged since October, when 30-year fixed home mortgage rates averaged 6.77%.

At this time, jumbo loans are considered too large to be purchased by Freddie Mac or Fannie Mae.  They usually carry higher rates than smaller “conforming” loans that do not carry guarantees.  Six months ago the average 30-yr fixed mortgage rate was 6.32%.  A $200,000 loan amount would have produced a monthly payment of $1,240.55.  The average rate is now at 5.23%, and therefore today the same sized loan would have a monthly payment of $1,101.93.  Basically, homeowners who have refinanced since would have saved more than $140/month.

Recent reports show that sales of existing homes fell in March but that the housing market is showing signs of stabilization.  Many “bottom-feeders” are scooping up distressed assets and helping inflate the housing sale estimates.  There is still a huge amount of existing supply and even more headed down the pipeline in the coming 12 months so chances are that we are far from out of the housing mess.  This presents a unique opportunity to buy while prices are deflated and build equity in a couple years.

March sales were down 7.1% year over year, and were weaker than the 4.65 million rate forecast by many housing analysts.  Single family home sales fell at around a 10% rate in the 1st quarter of 2009, after a 17.4% drop in the last three months of 2008.  First-time buyers made up 53% of existing home sales in March.  Sales of “distressed properties” made up for over half of all transactions in March with houses in foreclosure selling for 20% less on average than typical homes.

As the housing markets recover, prices will continue to stabilize and opportunity to get a steal of a price will lessen.  Now is the time to buy into this market if you have the means and are confident that you are capable of the monthly costs.  You can continue to rent obviously, and wait out the market even further to see if prices may decline as well.  No one can truly predict the bottom of a market, but it is clear when prices are this depressed that there is a good amount of opportunity to get a good deal.  You can learn from the mistakes of thousands of homeowners and lenders and remember to do your homework before committing to a decision that can cripple your ability to purchase in the future.

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