September 28th, 2015 8:11 AM by Jackie A. Graves
With some of life's milestones,
there may not be a picture-perfect time to take the plunge. But when it comes
to buying your first home, the combination of good market conditions and your
own financial situation can dictate timing. If you've got the credit and down
payment, you'd be crazy not to buy now. Want to know why?
are still low
The Federal Reserve was expected to raise rates this
summer, but so far they have stayed put. There is still talk that rates could
go up before the end of 2015. So what does that mean for buyers? Well, if
you're a millennial, a rise in interest rates could spell bad news.
mortgage rates hit 6%, a third of millennials (people younger than 35 years
old) wouldn't be able to afford homes as they're currently listed, according to
an analysis by HouseCanary, a
housing-data analytics company," said Money magazine. "Mortgages are huge
loans, so a seemingly small shift in interest rates can change a borrower's
monthly payment by hundreds of dollars (though going from the current 4.08%
rate to 6% is in no way a small shift)."
Investopedia's example using a $215,000 home with 20
percent down (leaving a $172,000, 30-year mortgage) figures a monthly payment
of $821.15 at an interest rate of four percent and $923.33 at five percent. Is
that $100 a month enough to get you moving?
down payment loans
buyers have typically gravitated toward FHA loans for their low credit score
requirements and down payments of just three and one-half percent. But new
loans from Fannie Mae require as little as three percent. Known as the 97% LTV
(Loan To Value) loan or Conventional 97, it can be more affordable for
first-time buyers because "the Conventional 97 program does not require an
upfront mortgage insurance premium, and because its annual mortgage insurance
rates are cheaper, too," said The Mortgage Reports.
market, home prices are up significantly from their lowest levels several years
ago, but are still within range of many buyers. Rents, on the other hand,
continue to go up, pushing household spending to new, uncomfortable, heights.
on a mortgage used to purchase a three-bedroom home were more affordable than
paying rent on a similar home in 66 percent of the counties recently analyzed
by RealtyTrac," said Mortgage News Daily. "Across all 285
counties analyzed, the average percentage of median household income needed to
rent was 29.96 percent while the average percentage of median household income
needed to buy was 29.00 percent."
you pay rent, the entirety of your payment goes to the landlord or property
owner, and all you get in return is a temporary place to stay. When you own
your home, the government essentially pays you money back for your investment.
biggest tax break is reflected in the house payment you make each month since,
for most homeowners, the bulk of that check goes toward interest," said Bankrate. "And all
that interest is deductible, unless your loan is more than $1 million."
points you paid on your loan are also deductible the year you paid them, as are
your property taxes. "These taxes will be an annual deduction as long as
you own your home," said Bankrate. "But if this is your first tax
year in your house, dig out the settlement sheet you got at closing to find
additional tax payment data. When the property was transferred from the seller
to you, the year's tax payments were divided so that each of you paid the taxes
for that portion of the tax year during which you owned the home. Your share of
these taxes is fully deductible."
homebuyers who put less than 20 percent down on an FHA loan will have to pay
Private Mortgage Insurance (PMI). It's one of the drags of having limited cash.
For the past several years, those payments have cost buyers an annual premium
of 1.35% of the loan balance, but a recent change dropped the premium to 0.85%.
change is expected to save more than 2 million FHA homeowners about $900 a year
and allow about 250,000 consumers to buy their first homes in the next three
years," said Credit.com.
also that your PMI may also be tax deductible, subject to a few restrictions
(and remind yourself again what portion of your rent is deductible: none).
by Jaymi Naciri – To view the
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