No one can tell you if it’s a good time for you and your family to buy a house. It’s a very personal choice on timing, on how much to spend and how much you can afford.
But by taking in all the information available and using common sense, it’s easier to figure out what is the right timing for you and your budget.
According to Fannie Mae’s National Housing Survey, 62 percent of Americans say it is a good time to buy a home. That is a 2 percent drop from September’s survey. Still, a strong majority of consumers believe there is opportunity in today’s housing market.
Each month Fannie Mae tracks consumer sentiment on home buying, selling and the economy. The results are compiled into the Home Purchase Sentiment Index, or HPSI.
“The HPSI returned near its record high this month, driven primarily by improvement in attitudes about selling a home and strengthening home prices,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “With consumers’ expectations for rental price increases continuing to outpace their expectations for home price growth, many consumers may view homeownership as a more attractive option. This should have positive implications for the housing market, which remains well below historical norms in relation to housing starts.”
Kent Carter, commissioner on the Oklahoma Department of Consumer Credit Board, said that what drives people to buy or not to buy a house is what they read or hear.
“Traditionally, when interest rates are going up, people start to say that they can’t afford a house. But in the last 25 years, the interest rate has only gone up to 7.16 percent,” he says. “Even if the interest rate goes up ½ point in the next year, we’re still fine.”
And now with the rates below 4 percent on a fixed rate 30 year loan, it could be a good time for people who are on the fence about buying a house to take that leap of faith. And for those looking to live in their home five years or less, an adjusted rate mortgage is available for less than 3 percent. That can make the monthly payments really low for those who have a tight budget.
Will Your Credit Keep you from Qualifying?
But all of these low interest rates really have to do with a person’s credit history. Lenders don’t just hand out money with cheap interest rates if someone has a questionable credit score or too many marks against them on their credit report.
“You really have to make sure your credit is in order, that you pay your bills on time and you do what you need to do to make your credit history be the best it can be,” says Carter. He also serves as vice president of the community bank division for First Mortgage Company in Norman, Okla.
He adds that U.S. Bank, which services a lot of mortgages, raised its credit score minimum from 640 to 660 just recently.
“That will impact a lot of first-time homebuyers and those who can’t put 20 percent down. That’s a real tough pill to swallow,” he says. “It’s a lot tougher these days, too, for self-employed people to get a mortgage because they write off some of their expenses for tax reasons, and that hurts them with how much they actually make.”
And the average credit score for FHA loans is over 700 and has been for two or three years, he adds. It’s even tougher to get one of those 3 percent down payment loans from Fannie Mae and Freddie Mac because the credit score has to be pretty high and the requirements are more stringent.
Get Help with your Down Payment
Saving money for a down payment seems to be one of the hardest things for Americans to do, Carter says. He suggests trying really hard to put even more in the bank than you need for a down payment (such as more than the required 3.5 percent for an FHA loan), and allow it to help the computer system to approve you. That extra money in the bank even if you aren’t going to use it as part of the down payment can truly make the approval go smoother.
For those who are eligible, there are plenty of down payment assistant programs throughout the United States. The Atlanta-based Down Payment Resource announced this monthly that homebuyers can now view down payment program eligible listings on two new public MLS websites—MLSPINhomes.com and MoveInMichigan.com.
Across both markets, 72 percent of homes may be eligible for some type of homeownership program. The company also launched a new partnership with Homes for Heroes to ensure more community heroes are aware of the discounts and savings available to them.
Buy in Winter
If you do decide that this is the time to buy a house, remember that the winter months can be a good time to look. The inventory might be less than in the typical house-buying season in the spring, but you also won’t have as much competition from other buyers. And those who are selling their homes during this season are very serious about selling, and that could give you a better deal.
“Most people don’t have the capacity to build wealth or to save a bunch of money. Historically, their homes were the thing that made them money,” Carter says. “It’s still a good investment even when we have periods of home price crashes.”