Waiting To Buy May Cost you

Still waiting for prices to drop a few more bucks before you buy? There is no doubt you may save money on the purchase price by waiting. But will it really save you money in the end? Possibly Not.

Let’s take one example at look at the numbers. There is a home that is currently listed for $150,000. The current interest rate for an FHA 30-year, fixed rate mortgage is 4.250%. You are approved FHA and can buy the home now but you would like to see the price drop another $10,000.00 so you wait.

• $150,000 price with the minimum 3.5% down payment with an FHA rate of 4.25% equals a principal, interest and monthly mortgage insurance payment of $796.85. (APR 5.349%)
  

You wait a couple of months and the price drops $10,000 so you decide to move forward with an offer. Your patience paid off. Unfortunately, interest rates have increased. Now rates can increase at a rapid pace (the saying goes “rates move down on the escalator, but UP on the elevator”).

For this example, let’s just say they went up a modest 1% to 5.25%.

• $140,000 price with a minimum 3.5% down payment with an FHA rate of 5.25% equals a principal, interest and monthly mortgage insurance payment of $824.57 (APR 6.335%)
  

In the end, waiting to save $10,000 on the price will cost you $27.72 a month or $332.64 a year or a total of $9,979 over 30 years. You didn’t save $10,000, it cost you $10,000.

• If rates were to increase to 1.5% more than now, the yearly increase in payment would be $852.00!

Work with professional and educated Realtors and Lenders to find out if buying now is best for your situation. For some, waiting is a must and there is nothing you can do about it. But for many, waiting may just end up costing you more in the long run. Remember, interest rates are volatile. We have seen historic lows and have gotten used to seeing them “low”. This won’t last forever. When rates go up, home prices tend to follow.