When the mortgage industry began its major struggles in 2007-2008, there weren’t many people looking to buy homes. In fact, many people were having trouble hanging on to the homes they had. Foreclosures and other distressed sales rose, and many of those who were able to stay in their homes were seeing the value of their homes drop to the point where they owed more on their home than it was worth. These facts, combined with rising unemployment left many home owners stuck between a rock and a hard place.
But things eventually began to turn around. The Making Home Affordable initiative was launched in 2009, and a series of interest rate drops over the next few years, started to making buying more plausible, especially for first time home buyers. By 2011 the turnaround had started to become notable. Still, many people wanted to hold old for the best interest rate they could get. They needed to see the values of their existing homes climb back up to the point where they could profit, or at least break even on that earlier investment.
Despite the fact that interest rates are creeping, many are still finding themselves house hunting for many reasons, and that the home buying “sweet spot” has not quite passed. Buying a house in 2014 is still a good idea, and here’s some reasons why.
Since more people have been buying homes over the last couple years, home prices have been edging upward, In August 2013 those prices rose faster than they had in seven years. But mortgage rates are still low, as of November, 2013 average mortgage rates were still less than 5% for a 30 year fixed rate. Historically, rates have been as high as 18%, in 1981, and the rates were near 8% in the end of 2007, as the housing crisis broke out.
Everyone knows that paying rent does not build equity and is not a true investment the way a home is. If you plan on moving on within a couple years, renting may actually be more affordable than buying a home, but for those who plan to stay put for five years or more, buying is the better value.
A detailed Rent Vs Own comparison takes into account factors such as closing costs, home renovations, maintenance, utility costs, and homeowner’s insurance for buyers as well as expected rent increases, deposits, and renter’s insurance for renters. A person’s tax bracket also plays a big role in the cost of renting or buying, and it’s at the six year point where most start to truly see the benefit of home ownership.
Recently, the Consumer Financial Protection Bureau drafted regulations that are expected to go into affect January, 2014. The standards for qualified mortgages are going to be a lot tougher, meaning those who do qualify will face less competition. Taking the time to give a little extra TLC to your credit over the next few months can mean getting the house you want at a lower price than you might expect
Many of the changes around the bend are designed to protect both lenders and consumers. Interest Only Mortgages and payment amounts that are even less than the interest for the month, will not be considered as qualified mortgages. When mortgages meet these requirements, the lender can’t be sued if the borrower can’t pay the loan. Fees will also be less inflated, and won’t be more than 3% of the loan balance. Interest rates for individual loans will also be guaranteed not to be more than 150% of the Prime Rate.
In the years preceding to mortgage crisis, many people stepped into mortgage arrangements that were too good to be true, and as a result they lost their homes. More realistic expectations reduces the risk of default and foreclosure.
With stiffer credit requirements for obtaining a mortgage in 2014, fewer homes will be available at low foreclosed or short sale prices as time goes by, and in future years homes will be almost exclusively at market value. Buying sooner rather than later may give you more options to snag a bargain home.