Thinking of taking the Home Ownership Plunge this New Year? Here are five things that make 2015 the year to buy.
1. Rents are on the rise. The foreclosure crisis did more than just lower housing prices it has raised rents around the country. All the people who had a home foreclosed on now need a place to live. The number of rentals has really gone up in the past year. So that means you have a lot more competition when it comes to getting a place to rent and rents will be going up. Industry experts expect rents to increase by 3.5% while home prices are expected to rise just 2.5% in 2015.
2. Mortgage rates are expected to rise. Mortgage rates are at an all time low but that is expected to change. The Fed has signaled they may raise rates on short-term funds. If that happens banks will pass that increase on to you, the consumer, by raising their rates. The Mortgage Bankers Association predicts rates will rise to 5%. While that doesn't see that much it adds up over the life of a loan. Take for example a loan of $349,000 at 4% will run you about $1666 a month. That same loan at 5% will run about $1874. That's $2496 a year more than 4% and $75,000 over the course of the loan.
3. Fanny Mae and Freddie Mac lower down payment requirements. The government controlled mortgage giants have lowered the down payment requirements to 3%. That means instead of coming up with $17,500 for a downpayment on a $350,000 loan, you can put down $10,500. Keep in mind in parts of Maryland you can qualify for USDA loans with no down payment. As well as VA loans with no down payment. With a USDA or VA loan and closing help from a seller, it is very possible to buy a home with zero cash at the closing table.
4. Homes will become less affordable. Currently home prices are affordable but leading experts say prices will rise more than incomes this year. In other words your paycheck will not buy you as much house as it has before.
5. Stop lining the landlord's pockets with your money. I know you have heard it before. I did the same thing, pay rent for years and help my landlord build wealth. Now as a home owner I am paying myself. For example, the average rent for a townhouse in Chesapeake Beach is $1800. Over a year that rent adds up to $21,600. So why would you pay that kind of money to someone else when you could build equity by paying yourself $21,600 every year.
Trust me I know it's hard to take that giant leap into home ownership. I was in your shoes just a few years ago. If you have any questions, send me an email michelle.doell@kw.com or give me a call or text on my cell 410-474-8995 or Office 410-972-4000. I am more than happy to sit down and talk with you about the home buying process. It's what I am here for.
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