Looking for a Deal? Don't Wait to Buy!

You have until December 1^st to close a home in order to qualify for the new first time homebuyer credit. That's only a little over three months away. It can take a month, or more, for a home to go from the first bid to closing. Not even counting the time it takes to find the home that you like.

So, why are you waiting?

Maybe because you are hoping that the interest rates will dip a bit more, or that the real estate housing prices will fall a little further. Interest rates, and housing prices, are already on their way back up. The bottom of the market was hit a couple weeks ago, and prices are on the rise. If you want to get the most bang for your buck, you need to act now.

So many potential first time buyers are waiting, though. They have heard all about the wonders of getting a great deal on a foreclosed home, and that is definitely a possibility. A better possibility is that they find an almost perfect foreclosure in questionable condition, and have to spend thousands of dollars renovating their new home. (So much for that tax refund…)

What these buyers are passing up on their way to the foreclosure of their dreams is a whole lot of great short sale homes, in move-in-ready condition. Great homes, for a great price.

The biggest risk of waiting to buy is the rising interest rates for home loans. Right now, the national average is right around 5% for those with good credit. And it's really easy to think that waiting a month or two isn’t a big deal. I mean, what is the difference of a percentage point or two, right?

Wrong. Consider this example. The median home price in the Chandler area is right around $230,000. If you save up the recommended 20% for a down payment ($46,000), you will need a loan for $184,000, which you'll be paying off for the next 30 years (in this example). These numbers don't count taxes, so they will all be a little higher for the actual monthly mortgage payment.

At 5%, you're monthly mortgage payments will be around $990, not counting taxes. The total amount of interest you will have to pay will be somewhere around $170,000.

At 5.5%, only a half percentage point increase, your mortgage payments would be $1045, with your total interest payment being just over $192,000.

Another half point, bringing you to 6%, would increase your monthly mortgage bill to $1100. The interest you would be responsible for over 30 years would equal approximately $213,140.

If you wait long enough, the rates may go up even more. At 8%, only three points above the current mortgage rate, your house payment would be a whopping $1350 every month. That's almost $400 a month more than you would have been paying if you bought a home, and locked in the current low rate, right now. That'll add up. Over 30 years, you will be paying around $300,000 in interest alone. That is about $130,000 over the total at 5%. In some parts of the country, that would buy you a very nice vacation home, put your children through college, or allow you to travel overseas for an extended vacation.

Let's talk short-term, though. In 7 years, a half point difference, from 5% to 5.5%, will cost you right around $8,465 more in interest. In just seven years, you could save more money on interest than you will get from the tax refund credit for first time buyers. If you act soon, however, you will get both. Don't hold out on a foreclosure property to save money. The difference in even a half percentage increase in interest rates will cost you money, a lot of money, in the long run. Consider a short sale or traditional home purchase, act soon, and you will be thanking yourself for the next 30 years.