If you are a first-time homebuyer or a repeat homebuyer, there are many things to…
Many people today are sitting on the fence trying to decide if now is the right time to buy a home. To help determine if now it the right time to buy or is it better to wait you have to answer ‘YES’ to one of these 2 questions:
Do you think home values will be higher a year from now?
Do you think mortgage rates will be higher a year from now?
Where are home prices going to be a year from now?
The Martini Group at Cardinal Financial Company does not put weight on one prediction by one industry leader but they look at the average of all of the trusted industry leaders (e.g. Mortgage Bankers Association, Fannie Mae, Zelman & Associated, Freddie Mac and the National Association of Realtor). The current predictions for the 2021 Home Price Application Forecast is as follows:
Mortgage Bankers Association: 10.3%
Fannie Mae: 8%
Zelman & Associates: 7%
Freddie Mac: 6.6%
National Association of Realtors: 6.6%
AVERAGE PROJECTED APPRECIATION: 7.7%
What does this mean for a home that is valued TODAY at $325,000?
If a buyer makes a 10% down payment on a $325,000 home today that would be $32,500 (NOTE: there are lower down payment options available offered by Kevin & Logan Martini with the Martini Group at Cardinal Financial Company…this 10% option is ONLY used for illustration) and the mortgage amount would be $292,500. When applying the average projected appreciation, this same home would cost $350,025 next year so if you are putting 10% down next year that would be $35,033.
Martini Group Bottom Line on waiting to buy a home.
The result of rising home values has a material impact on a potential home buyer. Waiting 12-months to buy could cost an additional $2,503 of down payment plus a potential increase $22,523 in the amount of mortgage needed.
Where are mortgage going to be a year from now?
Many experts (e.g. Freddie Mac, Fannie Mae, National Association of Realtors and the Mortgage Bankers Association) believe home loan rates will rise as the economy continues to recover. In fact Janet Yellen, the Treasury Secretary was quoted saying: “It may be that interest rates will have to rise somewhat to make sure that our economy doesn’t overheat, even though the additional spending is relatively small relative to the size of the economy”.When there is an increase in the mortgager interest rate there is an increase in purchasing cost and the projected average rate is expected to be 3.6% by the first quarter of 2022, which is a jump for where things are today.
What happens if home values and home loan rates increase?
A homebuyer will pay a lot more in mortgage payments each month if both of these variables increase. Assuming a buyer purchases a $325,000 home this year with a 30-year fixed-rate loan at 3%, for illustration ONLY, after making a 10% down payment, their monthly principal and interest payment would be $1,233.
That same home one year from now could be $350,025, and the mortgage rate could be 3.6% (based on the industry forecasts mentioned above). That monthly principal and interest payment, after putting down 10%, totals $1,432.
The difference in the monthly mortgage payment would be $199.
That’s $2,388 more per year and $71,640 over the life of the loan and then add to that the approximately $25,000 a house with a similar value would build in home equity this year as a result of home price appreciation, and the total net worth increase a purchaser could gain by buying this year is nearly $100,000.
Waiting to buy a home for 12-months could cost a small fortune!
Kevin Martini | NMLS 143962 | Certified Mortgage Advisor and Branch Manager | Martini Group at Cardinal Financial Company, Limited Partnership, NMLS 66247 | 507 N Blount St Raleigh, NC 27604 | (919) 238-4934 | www.KevinMartini.com | Kevin@KevinMartini.com | Equal Housing Opportunity
Logan Martini | NMLS 1591485 | Senior Mortgage Strategist | Martini Group at Cardinal Financial Company, Limited Partnership, NMLS 66247 | 507 N Blount St Raleigh, NC 27604 | (919) 238-4934 | www.LoganMartini.com | Logan@KevinMartini.com | Equal Housing Opportunity