Time to buy? Deadlines you should be aware of
I, for one, get tired of the relentless mantra that comes from some real estate agents “It’s time to buy”. It’s time to buy when it’s appropriate for you and your family and no one knows for sure what direction the market is heading in. In a way, it almost seems dishonest to say that NOW is the time to buy.
However, there are a lot of deadlines to consider if now is the time to buy for you.
1) The FHA funding fee of 1.75% is about to increase to 2.25% on April 5 which increases the buyers closing costs if purchasing with an FHA mortgage. Many people use FHA because it only requires 3.5% downpayment, where many conventional loans and PMI companies require 5-20% down depending on the location and the borrower.
2) FHA is limiting the amount that they allow the seller to contribute to the buyer’s closing costs to 3% (was 6%). If you read #1 then you remember that costs are also going up, which means that buyers will most likely need more than the 3.5% down payment, they’ll also need additional money to cover their closing costs.
3) The most famous reason: tax credits! The government is literally paying you to purchase a home. You need to have it under contract by April 30 and close by June 30 to take advantage of this program. Will they extend it again? Maybe, maybe not. I’ve heard: no, not right away, yes but not as much. The only way to get it for sure is to have an accepted offer by April 30.
4) Interest rates are really really low right now. If you’re getting a $100,000 mortgage an increase of only a half a percent will decrease your buying power by 5% (you’d have to reduce the purchase price by $5,500 to have the same payment). This can be significant as rates historically have been 1-2% higher on average.
If you’ve been sitting on the fence waiting for the bottom of the market in prices, you may want to take these other factors into consideration. Even if the market should decrease slightly more, you’re still money ahead by acting now.