You need somewhere to live, so you might as well buy a house and build equity over time instead of paying rent and building value for someone else. The housing prices right now are very high, and interest rates for the last two years have been lower than they’ve ever been in the history of our country. Those rates are gone, and a 15-year mortgage comes with an interest rate starting at 5.45-5.1%, depending on the lending institution and your credit score.
If you’re going to purchase a home in the current market, a 15-year mortgage is definitely offering the best rates and loan terms of any mortgage product. Mortgage rates are on the rise thanks to record-breaking inflation. We could be heading into a recession, but we need one right now to even the scoreboard for home buyers. If you secure a 15-year mortgage right now and the interest rate drops again in a few years, you should refinance your mortgage.
The Truth About the Housing Market and Property Values
Housing is in short supply in America, and that problem isn’t going away anytime soon. Property values are going to drop as the market cools, but not by much thanks to the scarcity problem. There are far too many people looking for too few affordable homes. Many property owners realize that trying to find a house to buy is very difficult and expensive, so they don’t want to sell their properties.
Exacerbating a problem that’s slowly worsened for decades are the hoards of corporate investors that have spent the last several years snatching up the available supply of cheap properties in most markets. They’ve repaired these properties and turned them into buy-and-hold rental properties. Property values are rising across the nation as a result. This picture might seem bleak, especially when combined with rising interest rates. All hope isn’t lost, however.
Strategies for Finding Affordable Homes
The best strategy for affording a home right now is to have great credit, establish an emergency fund and save six months’ worth of expenses, have a debt to income ratio of less than 43%, and save up for a down payment of 3-10%. If you’ve never purchased a home before or it’s been at least 10 years since you last took out a mortgage, you should look at first-time home buyer’s loans and home renovation loans.
There are several options if you want to buy an affordable property that’s a little run down or you have an older fixer-upper home now that needs significant repairs. You could secure the funds to make renovations by taking out a second mortgage or getting a renovation loan. These types of loans can come with 15-year fixed rates, which results in the lowest interest rate and best loan terms. Paying off the loan in 15 years instead of 30 years results in you paying less than half of the amount of interest in the end, which can add up to $100,000 or more in savings. Making your own repairs can also result in much lower renovation costs.
If you’re interested in purchasing a home with a 15-year mortgage, let a Potempa Team member help you get started now.