You cannot turn on the news today without hearing some sort of statistic about the housing market. Home sales have been dropping consistently for several years, which has caused a deep slump in property values around the United States. Today, homes are sitting on the market an average of 4.7 years, as opposed to the less than 12-month statistic realized back in 2007. For many people, the negative media and economic downturn concerning home sales, home foreclosures, and loan rates have caused them to remain cautious before buying (or even considering) a new home. Yet, according to financial analysts with MSNBC, right now is actually the best time to pursue homeownership. Why? Check out these five reasons you should consider buying a home:
5 Reasons to Consider Buying a Home
- Saving Money: Yes, owning a home can cost you less than renting—especially in today’s market where property values and home prices are plummeting. In 2011, rental giant Reis Estate Firm released a statement forecasting rental costs to increase by as much as 5% that year. Bottom line: you could pay less for your own home each month than you do to rent someone else’s.
- Home Values Will Start to Increase: According to the S&P index, the housing market is currently down. However, experts also suggest that we are at the rock bottom of the housing crisis. If you purchase a home and plan to stay there for a while, you’ll likely see gains in equity over the next seven years.
- Mortgage Rates Are Low: In 2011, mortgage rates hit an all-time low of 3.78%. Although they are slightly higher today, they are still low compared to mortgage loan rates from several years ago.
- Housing Prices Are Appealing to Buyers: That house that has been sitting on the market for six years will likely come down in price. Many sellers are eager to sell quickly, which means houses are selling for much less. Plus, the market is flooded with foreclosures, where quick sales can offer new homeowners great deals.
- Loan Availability: Financial experts estimate that now is the best time to qualify and receive a loan. With the government’s push to increase home sales, loan availability is easier, even for those with less-than-perfect credit. Additionally, loan options are becoming more customizable to meet buyers’ needs, and financial institutions and sellers are motivated to close deals.
VA Mortgage Loans, FHA Loans, RHS Loans…What’s the Best Type of Loan?
Now that you know WHY you should consider buying a home, the next step is understanding HOW. Figuring out loan types and getting the best deal can be a difficult endeavor. Just like there are hundreds of corporations that help new homeowners secure loans, there are many scam artists looking to take advantage of prospective new buyers. Do your research on reputable websites and consult a trusted real estate agent for guidance. You should also talk to your financial center for pre-approval and rate information before shopping for a new home. The following overview gives you definitions of common loan jargon to help you understand some of the more common loan options available for buyers today:
- VA Mortgage Loans: These loans are essentially guaranteed by the U.S. Department of Veterans Affairs, meaning they are available to veterans and service men and women. They often offer loan security without requiring a down payment. Eligibility and price caps are determined by the VA, and your loan is backed by the government. VA Mortgage Loans should be a top consideration for all veterans and service personnel when buying a home.
- RHS Loan Programs: The RHS (Rural Housing Service) is backed by the Department of Agriculture and guarantees loans in very rural (agricultural) areas.
- State & Local Housing Programs: If income is an issue, many states across the U.S. offer low-to-moderate housing finance programs for first-time buyers. These loans are appealing to those without stellar credit and often come with a tax credit at the end of the year. The good news is that interest rates are generally lower.
- Fixed-Rate Mortgage Loans: These are the most commonly used types of loans, which keep your mortgage payments the same throughout the loan’s duration. Typically, you can acquire 30- or 15-year fixed-rate mortgages, bi-weekly mortgages, and convertible mortgages.
- Lender Buydowns: Lender buydowns offer a discounted interest rate initially to help the homeowner settle into their new home. The interest rate increases over the years, but one advantage is that, generally speaking, after the first three years, the interest rate becomes fixed.
- Adjustable-Rate Mortgages: These loans can be tricky and risky in a volatile financial market. They make homeownership easier in the beginning but allow interest rates to fluctuate in the future according to market conditions.
Purchasing a home truly is the first step in the right direction toward financial security. Owning your home is a smart investment of your time and money. When you consider that your rent payments are systematically buying a home for someone else, it doesn’t make much sense to continue renting—especially with so many options for homeownership. As long as you are an informed buyer and do your homework, the American Dream of homeownership can truly become a reality for you.
