It’s time to shit or get off the pot, as my brother used to say. For several years many buyers have been standing on the sidelines waiting for the perfect time to buy and rightfully so. No one wants to buy an asset that’s declining in value. That declining period is now behind us and home prices are on the rise across the country and especially here in the low country.
Many local markets have seen double digit gains in the Charleston area in just the last year with some as high as 10-15%. Why is 2014 the best time to buy? Because it’s still cheap to buy a home. The federal reserve is continuing its monetary policy of keeping rates low however they are going to increase rates in the short term and as the year unfolds, borrowing costs will move higher. If you wait you may see that payment you had your heart set on disappear because of rising rates combined with rising home prices.
As rates increase buyer’s lose purchasing power
To qualify for the lowest interest rates and the lowest payments in South Carolina you should act right away. Take action by getting pre approved to see what you qualify for. If you wait, you are sure to lose purchasing power as interest rates increase. In fact for every 1% interest rate hike, you lose about 10% in purchase power. In just the last 8 months that happened. What does this mean for you? Let’s look at an example of a $300,000 purchase price with our minimum 5% down payment. That leaves a loan amount of $285,000
In May 2013 your rate was 3.5% and payment was $1279
Today your rate is 4.625% and payment is $1465
That’s almost a $200/ month increase in payment and it will cost you $66,787 more over the life of the loan in interest charges. Those are big numbers. This example doesn’t take into account that home appreciated too making it more expensive than it was last year
That extra 200/ month may disqualify you from purchasing the home altogether. If you want to keep the $1279 payment you would have to find a home that only costs $262,000. That might mean you have to chose an inferior neighborhood. The point is waiting is only going to cost you more money, and possibly some happiness of living where you want
About the author: Eddie O’Neill is a mortgage export with over 10 years of experience in the mortgage business. NMLS # 251457. You can find more information on Eddie and his company at Facebook