Why First Time Buyers
Should Buy A House Now
I’ve been a REALTOR since February of 1989, classifying me
as an “Old Timer” in the business. My “Old Timer” status is, however, business
only!
When I entered the business in 1989, our country was in an economic
recession with interest rates hovering around the 12% mark. I vividly remember
the first house I sold; it was a ranch style home, yellow in color with a
2-stall garage. Total square footage was around 1100. The buyers purchased it
for $74,000.00 with a down payment of 20%, financing in the amount of$59,200.00
on a 30-year mortgage with a monthly payment of around $700.00, NOT including
taxes and insurance. OUCH! 1989 was not
a great time to buy a house! Fortunately for me, and the real estate industry,
interest rates began a free fall in the early 1990’s, eventually leveling off
to a median rate of around 7.5% where they remained (fluctuating between 8.5%
and 5.5%) until 2008. This was an amazing time for the real estate industry
with appreciating home values and record home ownership numbers. Mortgage
financing was easy to obtain with many zero down loans available. The monthly payment
on that same $59,200.00, 30-year mortgage would have been $414.00 at a 7.5%
interest rate, almost a $300.00 per month difference. Unfortunately, the
relaxed guidelines for mortgage lending eventually led to our most recent
recession.
So why is the next 30 days the best time EVER to buy a
house?
$30,000,000.00 in grant funds just became available to
assist first time buyers with a home purchase in Michigan. The amount each buyer
will receive is $3,000.00, with current military personnel, veterans and
reservists receiving a $5,000.00.00 grant. This money can be used for a down payment,
closing costs, whatever and does not need to be paid back. There are no
qualifying guidelines other than the first time buyer requirement and an
approved mortgage. You may remember the recent $8,000.00 tax credit incentive?
That money could not be used toward a down payment! Additionally, today’s FHA
interest rates are around 3.25% (remember 12% interest rate mentioned earlier)
and housing prices are at levels of 10 to 15 years ago!
What does this all mean?
Let’s take that $74,000.00 house and buy it today, but we’re
not going to pay $74,000.00, we are going to raise the price to $77,000.00 and
have the seller pay $3,000.00 of the buyers closing costs, pre-paid taxes,
insurance, etc. FHA financing requires a
down payment of 3.5%, or $2,695.00 of which is covered by the $3,000.00 in
grant funds, using the$305.00 of left over grant money toward the home inspections.
There is NO money out of pocket, but here’s where it gets fun; the principle
and interest payment on a 30-year mortgage @ 3.25% interest rate is $335.00
(Remember that $700.00 per month payment without taxes and insurance included,
and with 20% down payment?). Throw in some taxes, insurance and PMI (Low money
down loans must have PMI) and your monthly payment only rises by $210.00, or $545.00.
That’s it!! Again, this scenario is NO MONEY OUT OF POCKET! Try finding
anything other than a studio apartment for $ 545.00 per month!? Let’s now factor in your
new home’s appreciation at a rate of 3% per year and a mortgage interest write-off
of 15% of interest paid and your monthly payment, after appreciation and tax
savings, just became $321.75! Yes, $321.75!!
The following is a scenario for a $150,000 home
purchase: Figure a down payment of $5,250.00
minus $3,000.00 or $2,250.00 down. Ask the seller for 3% of purchase price back
to cover closing costs, etc. and your total out of pocket is $2,250.00. The new
payment, including taxes/insurance/PMI @ 3.25% interest over 30 years is around
$1,011.00 per month. After applying the above mentioned applicable appreciation
and tax savings, the new monthly payment reduces to around $575.00!!
In conclusion:
Based on the information above, FIRST TIME HOME BUYERS MUST RUN,
NOT WALK TO THEIR NEAREST REALTOR AND PURCHASE A HOME WITHIN THE NEXT 30 DAYS.
THERE TRULY HAS NEVER BEEN A BETTER TIME TO BUY!!!
I can be reached anytime @ 616.366.5240 or by emailing jeff@grhomelink.com. I LOVE first time
buyers!
Call us with all of your Real Estate Needs @ 616.426.3110 Jeff Northouse Group www.jeffnorthouse.com Brokered by Keller Williams Realty
