If you have ever been on the fence about buying a home, now might be the time to slide off that fence and buy!  Interest rates are nearing an all time record low, and I'll get to that in a minute.

If you are considering buying a house whether it be first time or not, here are some things to consider.

  • Seller's know that on average, their house is going to be on the market for an extra 30-45 days, or maybe longer because of the time of year.
  • With Christmas and New Year's coming up quickly, seller's are highly motivated to discuss any "reasonable" asking price for their home.
  • If you are really interested in a particular house, be prepared to play ping pong, back and forth for a while.  While your initial offering price might not be accepted, be prepared for a counter offer by the seller.  If you play the game right and work with your Realtor who is your chief negotiator, you should come out of the deal alright.
  • The inventory in Marion, Cedar Rapids, Hiawatha, and surrounding areas is plentiful.  All price ranges are well represented so you should have many houses to choose from.
  • If you want to buy a house but only live there two to four years, consider an adjustable rate mortgage (ARM) with interest rates even lower than the 30 Year Fixed Rate. 

Now, let's talk about that interest rate!  Let's say for example purposes that today's interest rate is 5.75%.   Is there any indication that this interest rate will continue to level off and/or down trend in the next month or two.  Really, there are no guarantees.  Typically interest rates during this time of year tend to be on the "lower than" side to increase sales and spur the economy. 

Let's crunch some numbers and you'll see what I mean!  Let's say we are purchasing a $100,000 home.

Interest Rate                                   0% Down (30 year Fixed Rate)                      20% Down (30 year Fixed Rate)

6.5%                                                $834 a month ($10,008 a year)                       $647 a month ($7,764 a year)

5.75%                                              $785 a month ($9,420 a year)                         $609 a month ($7,308 a year)

SAVINGS                                         $588 a year or $5,880 for ten years               $456 a year or $4,560 for ten years

That's a huge savings either way you look at it.  Whether you finance with twenty percent down or finance with zero percent down, the savings are still outstanding. 

Here's another thing to remember.  If you don't have at least 20% equity in your house, you will have to pay PMI (Private Mortgage Insurance).  This protects the lenders on the front side of the loan in case of default.  In this scenario with a 100K home purchase, our PMI for zero percent down financing would be $60 dollars a month.  Also, this PMI payment does nothing for you.  It goes directly to the insurance company, thank you very much.  What I am trying to say is, if you look at the savings you are getting by buying a home now at 5.75%, you could very well whittle away at that 20% equity so that you would no longer have to pay the PMI.  Try to put down as much as you can; that way you won't have PMI payments any longer than you have to. 

If you would like to see what's out there for inventory in any specific price range, please call me at 319-329-5988 or visit my website at www.ChristopherSmithRealtor.com for more information.  Financing for First Time Home Buyers is awesome.  If you need to sell your home before you buy, remember that the buyers that are out there are serious buyers.  That sometimes is the big equalizer.  If your home is on the market now, the buyers that do come through your home are also very motivated to buy to remember to have your house in A+ condition so buyers won't drive down the street to the home that is!