Now is the best time to purchase a home. Housing Affordability is near a record high. This is due to the historically low interest rates and home price levels prior to the “Boom Years” of real estate in our area. The mortgage rates and home prices in our area really cannot go much lower than they already have. The person who purchases when others do not, stands the greatest chance of obtaining a fantastic buying opportunity. Home sales generally decline during the holidays, so the smart buyer would commit to buying a home at that time rather than wait for the new year or Spring market when the majority of homes are sold for the year. Buying when everyone else buys is what causes spikes in home prices due to multiple buyers trying to purchase the same home. The median price of a home or condo in our area has begun to rise according to the National Association of Realtors report for the third quarter of 2010.
In our area less than 2% of all properties are in a distress situation. This means that more than 98% of property owners in our area are meeting their financing obligations. It also means that Monmouth County, NJ is one of the stronger and most desireable real estate markets in the country. The reason for this is our beautiful shore location and commuting distance to New York City. Even people like Bruce Springsteen believe in purchasing real estate in our area as his song above describes possibly his mansion on a hill in Rumson, NJ.
Many people are led to believe that financing is difficult, if not impossible, to obtain which is not true. The Federal Housing Administration (FHA) provides financing for owner occupied homes up to $729,000 with 3.5% down. They also allow for less than perfect credit borrows. FICO credit scores can be as low as 620 to obtain an FHA loan. They also allow family members to assist the home buyer. The FHA 203k loan is perfect for buyers looking to purchase a home that needs repairs or remodeling. This loan is a very good choice for people who can afford the home but do not have the funds to renovate the home. Using this type of loan can build instant equity in a home by taking a home that was otherwise unihabitable, like a foreclosure or damaged house, and creating a newer inviting home.
FHA Loans are also assumable which allows the seller to offer their buyer possibly better mortgage terms than they could obtain at a bank. Most people move every 5 to 10 years. Buying a home today with an FHA loan at roughly 4.5% will help sell this home for a better price in 5 to 10 years. There are basically two reasons for this. One, in all likelyhood interest rates will be higher than 4.5% at that time (interest rates have not been this low in most of our life times). Two, assumable mortgages allow the new buyer to pick up the payments of the seller which means that selling a home with a 30 year mortgage in 5 to 10 years leaves 20 to 25 years of payments remaining. This also lets the new buyer build equity faster because the first 5 years of a loan are generally interest. They would also save 5 to 10 years of mortgage payments which if you were to use a payment of principal and interest of $1500 would equate to a savings of $18,000 per year times the number of years shortened from the 30 year loan. Based on using 5 years, it would save the buyer $90,000 in mortgage payments in addition to the difference in mortgage rates 5 years from now vs interest today’s rates.
For those intersted in learning more about home purchases and financing, Better Homes and Gardens Real Estate Preferred Properties is offering a Free Home Buyer Seminar on December 1, 2010 at their office located at 105 East River Road Rumson, NJ 07760. Please call 732-224-9200 x 102 for reservations.
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