Having enough money saved to comfortably afford the purchase of a home is essential to being a successful homeowner. No one should jump the gone and buy before they have secured steady employment, garnered a good credit rating and have saved enough for a healthy down payment.
However, there is a also a real cost to buyers who are waiting to buy a home. Being cautious is wise, but delaying, waiting or putting off a home purchase has real consequences as well. Two factors will increase the cost of carrying a home of equal value if you put off the purchase.
The first is the rising housing prices in the towns along the Midtown Direct train line towns. For instance the housing prices in South Orange are up 8% year-to-date. So a house you liked last year for $400,000, now costs $432,000. If you didn’t save more for a larger downpayment then your monthly costs on the same house have gone up by several hundred dollars per month.
The second major factor that negatively effects waiting to buy a home are the interest rates. They do not have to fluctuate much to have a real impact on monthly mortgage payments. EX: if you are thinking of taking out a $400,000 mortgage and interest rates go up 1 point, it will cost you either 10% more to carry the house or you can now afford a mortgage of only $360,000.
The bottom line on your monthly mortgage expenditure as interest rates increase is very real and they are expected to increase in the first quarter of 2017. If it goes up 1 point (as expected) it will cost 18% more per month to live in the same house.
Difference in Monthly Payment
What happens when both rates and prices increase? That’s a double whammy for the home buyer. Make sure you are in close contact with a reputable mortgage specialist who can council you on the various options you have right now to buy versus down the road. I do not endorse anyone, but have worked in the past successfully with Matthew Keane, SVP, Mortgage Lending at Guaranteed Rate.