I'm back from a long vacation and catching up on what I missed. There's a lot to cover, so check back for more blog posts over the next few days, but I'll start today with the REALLY good news for home-buyers or homeowners looking to refinance: interest rates are at all time lows! I'm seeing 30 year fixed FHA loans quoted as low as 4.0% which means your monthly mortgage payment (principal and interest) for a $200,000 house would be only $921.41 with only $7,000 down! And that payment is locked in for 30 years!
If you're currently renting and having a hard time deciding if now is a good time to buy a home ask yourself this question: will my landlord give me a rock bottom rental rate and lock it in for 30 years? More likely your rent will go up 3-5% every single year, whereas a mortgage payment is locked in and allows you to confidently plan your personal finances far into the future. Being able to lock in historically low rates at a time when housing prices are affordable by historic standards and sellers are willing to make all sorts of concessions for qualified buyers presents a once in a lifetime buying opportunity.
Some people will argue that the low rates aren't as valuable to buyers who don't plan to own their home for the full 30 years. To those folks I say the following two things:
1. If you plan to live in a home for less than 5 years think long and hard about whether buying is a better option than renting for you. Home-ownership is a lot of work, and if you're looking at it as a short-term housing solution you may end up wasting a lot of time, energy, and money in the home-buying process (or it may work out very well - it's just important to think it through).
2. FHA loans are assumable. This means you can pass your mortgage along to a future buyer of your home allowing them to keep your original interest rate. So if you buy now and lock in 4.0% interest for 30 years and then sell your home in 2020 when mortgage rates have risen to, for example, 7.0%, you could offer to let a buyer assume the remaining 20 years of your mortgage, giving them a rate that's 3 percentage points lower than what they could get at that time. Compared to sellers who can't offer assumable 4.0% financing you'll be in a much stronger position. Because of this, an assumable mortgage with a low fixed rate actually adds value to your property as interest rates rise! This principal also applies to refinancing your home with a low-interest, assumable loan.
Next time I'll discuss some of the less good news of the past couple weeks, but there are silver linings all around!