All the right conditions are in place to make this the best time to purchase a home we’ve seen in years. For months many buyers have resisted purchasing a home due to a number of reasons, including lack of inventory or difficulty in getting a mortgage due to strict guidelines.
The reason we say the next four months is the best time to buy a home—and not wait until the spring—is that these optimal conditions will change once the spring comes. There will be a surge of buyers looking for homes in spring, which will reduce the ample inventory on the market right now. You will not have as much competition for these homes now as you will in the spring, so take advantage of the inventory levels while they’re still high.
Now we’re finally starting to see changes that mean more buyers will be able to purchase a home and for less money than even a few months ago.
Here are the 3 main reasons now is a great time to purchase a home
1. Interest Rates at Their Lowest Levels in 18 Months
Interest rates have been hovering below the 4% range for a few weeks and earlier this month dipped to the lowest point we’ve seen in 18 months.
Back in January, the average conventional interest rate was at 4.53%, today they are 3.99%, which adds up to huge savings on your monthly mortgage payment.
For instance, when the average conventional rate at 4.53%, a monthly payment on a $350,000 loan would be $1,780. With today’s rate of 3.99%, the monthly loan would drop to $1,669 a difference of over a hundred dollars a month.
These low rates are good news for home buyers.
“A client who locks in this rate today can save $100-$250 a month compared to just a few months ago,” mortgage broker Shant Banosian said.
Mortgage rates for so-called jumbo loans (loans above the loan limits set by Fannie Mae and Freddie Mac) are actually lower than conforming mortgage rates. Today’s rate for a jumbo 30 year fixed is 3.90% for a 30 year conforming loan.
Home buyers should take advantage of these low rates now before they go back up.
2. More Inventory Means More Choices for Buyers
One of the most common complaints we heard from buyers in the spring and throughout 2013 was that there weren’t many homes to choose from. A shortage in housing inventory kept buyers from finding the right home, and some stopped looking altogether.
The housing market in Massachusetts has changed dramatically since the spring. The major driver of this change is that housing inventory is actually up. Six months ago there were 22,285 homes on the market in Massachusetts, 15% fewer homes on the market than right now at 26,204. Typically there are more homes on the market in fall than in the spring, but this year the difference is larger compared to last year when there were 22,188 homes on the market in April, just 11% less than in October of last year when there were 24,825.
With more homes on the market buyers will finally have an easier time finding the right home for their needs.
3. Mortgage Guidelines Loosened
With last week’s announcement from FHFA, one of the biggest blocks to the housing recovery will be lifted.
Mel Watt, Director of the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, announced policy changes that will allow more home buyers to obtain mortgages. The most exciting change is that they will offer mortgages for as little as 3% down instead of 5%.
For many borrowers a change from having to come up with 3% down instead of 5% could mean the difference between being able to purchase a home and having to put it off. For example, a 5% down payment on a $300,000 home would be $15,000, while a 3% down payment would be considerably lower: $9,000.
Watt also announced other policy initiatives to loosen mortgage purchase guidelines to encourage lenders to offer mortgages to more borrowers, even those with less than perfect credit. Up until these changes were announced, to protect themselves against risk of having to buy back loans backed by Fannie/Freddie, many lenders have required credit scores from borrowers that were much higher than required by Fannie Freddie, shutting out many buyers.
New policy changes will change this, allowing more buyers to be able to apply for a mortgage with a lower credit score.
Watt said he would outline the details of these changes in the next few weeks, and they will likely take effect the first of the year.
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