Written by a loan officer...
The number one reason to buy a home right now may surprise you. The number one reason to buy a home now is NOT that the first time home buyer tax credit or the repeat home buyer tax credit is ending this spring. However, both of those are good reasons to buy a home right away.
The number one reason to buy a home NOW is found in the following quote from last week--
"April 1 will be the first day that the Federal Reserve will end its debt purchase program and allow the struggling U.S. mortgage market to operate unassisted. As a result, the Fed believes mortgage rates will rise about three-quarters of a percent to about 6 percent," Boston Fed President Eric Rosengren said recently.
Here is the projected economic impact if you a buy a home in April or later according to the Fed-
· If you buy a $200,000 home with a FHA loan and put 3.50% down your monthly payment just increased by $93 a month or $1,120 a year! That's equal to eating out 4 times a month at Chili's and their 3 Courses for $20 Menu.
· Your monthly payment increase is 8.6%, this is equal to every home seller in the country raising their prices by 8.6%. Yuck!
· Finally, if your debt-to-income ratios are really tight your pre-approval for a home price of $200k, just got decreased to $182,800.
· Or if your pre-approval is good for a price of $175k, it just got decreased to $159,950.
· Or if your pre-approval is good for a price of $150k, it just got decreased to $137,100.
So, how do you avoid this from happening to you? First, you could hope or pray that the Fed will extend their purchases of mortgage bonds. Second, you could buy a home BEFORE the Fed's purchase plan expires on March 31st.
It's your choice. You have been warned.