There are myriad reasons to purchase residential real estate in the current market, not the least of which is that we are experiencing the lowest interest rates that many of us have seen or will see in a lifetime. Added to that, although Houston has experienced a far more stable market (compared to dramatic downturns in other major markets, where values may have dropped as much as 30% and more), home prices have still reduced somewhat from those asked for the same type of properties just two years ago.
This translates to astoundingly far greater buying power than available even less than two years ago. Think about this for a moment. A buyer who would have qualified for a monthly mortgage payment of $1,350 two years ago when rates were at 6.5% (equal to $225,000 principal on a 30-year fixed loan, with a 10% down payment) could have purchased a home priced at around $250,000. At today’s rates of about 4%, using the same term and down payment criteria as well as that same monthly payment amount, a buyer would qualify for a $283,000 loan on a $315,000 purchase. So, (without considering that today’s prices in Houston might provide bargains that weren’t available just two years ago) the buyer’s purchasing power has increased by a whopping $65,000. In the alternative, the buyer could choose to buy the $250,000 home with the same $225,000 mortgage, but with payments of $1,075 which equates to $275/month less or a $99,000 savings over 30 years.
This is not voodoo math, it’s reality. At higher price points the variance in buying power is even more dramatic. You can calculate mortgage payment possibilities with the handy calculator tool from Capital Security Mortgage (capitalsecurity.com) to see what we mean. And lest you worry that buying now is premature and that rates might fall even further, just remember that, in such an event, you can refinance!
None of this takes into consideration the other concessions or incentives a seller or builder might consider (the payment of closing costs, the offering of home warranties, or builder upgrades to name a few). Further, given high inventory and lower demand, buyers may have less competition and, therefore, greater negotiating power. Even so, don’t expect really low-ball offers to fly. Today’s sophisticated sellers have Heritage Texas Properties agents who’ve given them guidance and likely have already reduced their prices to sell.
There has never been a better time to buy a house, and Heritage Texas Properties agents are eager to show you all the possibilities, give you sage advice and, when you see something you want, help you write an offer. A good starting point is the “open house” function on our excellent website, heritagetexas.com, where exciting new additions appear daily!
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First Time Home Owners
Whether you have spent years saving and preparing to buy a home, or you are still unsure, the questions surrounding a first-time home purchase can feel endless. You can find the answers and peace of mind by working with me. I will guide you through the process to make it as seamless as possible.
Here are some tips to help you with the process of becoming a homeowner.
- Prequalify for a loan. Being prequalified for a loan determines how much house you can afford. It also allows you to move more swiftly when you find the right house, especially when you aren’t the only interested buyer. A mortgage prequalification can also give you additional leverage with a seller in negotiating the best possible terms of the sale. For information about prequalifying please contact me at 713-502-3373.
- Shop for mortgage rates and terms. A difference of even half a percentage point can make a huge difference in how much you pay over the life of a loan. For example, the difference in the monthly payment on a $100,000 mortgage at 8 percent vs. 7.5 percent is about $35 per month. Over 30 years, that’s $12,600.
- Use a buyer’s agent. A buyer’s agent is legally responsible for representing the buyer’s interest in a real estate transaction. Generally, the buyer agent is compensated by the seller at the time you purchase a new home. This means the service is completely free for you!
- *Understand features that help or hurt resale value.* In some areas, a swimming pool actually detracts from a home’s value and makes the home harder to sell. In neighborhoods with two-car, attached garages, a single-car or detached garage may impact the home sale and future value. I can point out features that hurt, as well as those that help, resale value.
- Rate the houses you tour. After touring each home, write down what you did and didn’t like. Develop a rating system to help you narrow the selection down to the house that’s the best for you.