There’s no crystal ball to predict the future of mortgage interest rates or home prices. So, ask yourself these five questions to help determine if now is the best time for you to buy a home:

1. What is the current interest rate?

In 2018, mortgage interest rates for a 30-year fixed-rate loan have topped 4.5 percent, markedly different from the past two years, which saw rates stay near or under 4 percent. Still, interest rates are expected to stay below the historic average, which is around 7 percent, making home ownership relatively affordable. If you can qualify for an interest rate at the current rate or below, you may want to consider securing that rate now, before the rates jump. Even the smallest of changes in interest rates can affect how many dollars you dish out during the life of your loan.

2. Are home prices affordable?

Prices increased nationally by 5.4% in 2017, compared with 5.8% in 2016, according to Clear Capital, a provider of real estate data and analysis. CoreLogic, a financial data and analytics company, forecasts that prices will rise by about 4% in 2018, reverting to their historical pace.

These rising home prices are due, in part, to a strong economy and job market. Additionally, spring and summer is the busiest season for real estate, which means prices generally rise during the hottest months of the year.

Housing analysts believe the market will cool off and prices will come down in 2018. If you can wait a few months, you could see more competitive prices, as the housing inventory is typically more robust during the fall and winter seasons.

3. Is your credit in order?

Even if the real estate market looks promising, you should first make sure that you are creditworthy before you shop for the house of your dreams.

When you apply for a mortgage, your lender will pull your credit reports to help determine the terms and interest rate of your loan. In general, higher credit scores will qualify you for a lower interest rate. But don’t wait for your lender to pull your reports—order your copies now so that you better understand your profile as a borrower and are familiar with the information your lender may see.

If you find any inaccurate information in your credit reports, file a dispute with the credit reporting agency that furnished the report before applying for your loan.

4. Have you budgeted for housing expenses?

Make sure you have budgeted for your home’s down payment, which can be as high as 20 percent of the purchase price for a conventional loan. Closing costs and moving expenses will also quickly increase your total expenses.

To help you determine which house you can afford, plan to spend 25 to 33 percent of your gross monthly income on your housing expenses. The exact amount you spend on housing will depend on how conservative you want to be with your money and what you spend on your other debt payments.

5. Are you familiar with your local real estate market?

Once you’ve selected your neighborhood, keep a close eye on the local real estate market. Keep track of home prices in the area, monitor how many houses are on the market and how long it takes for them to be sold.

 

Posted by:scoresense.com

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