Knowing how much you can afford is an important first step in your home buying journey. However, many buyers make the mistake of only factoring the list price of a property into their final decision. And as prices continue to skyrocket, you may be wondering if it’s possible to make a move in such a competitive market.
Believe it or not, homes are now more affordable than ever—here’s why.
Low Interest Rates Have Made Homes More Affordable
If you’re thinking about buying a home soon, you’ve probably noticed that the market isn’t as saturated as it once was. That’s because there are 39% fewer homes for sale today than at this time last year, yet buyer demand continues to set records.
These market conditions have caused home prices to rise by a whopping 5.5% since last year. However, potential buyers should realize that the price of a house is not as important as the cost. Let’s break it down.
Low interest rates can save you thousands of dollars
As homes continue to increase in price, buyers can still save quite a bit of money by making a move right now. Mortgage interest rates have recently reached record lows—and the lower your rate is, the less interest you’ll pay back over time.
Just a few weeks ago, Freddie Mac announced that the average interest rate for a 30-year fixed-rate mortgage was 2.87%. At this time last year, rates averaged around 3.73%, which is almost a full percentage point higher!
Even a small reduction in mortgage rates can increase purchasing power
While such a small difference in mortgage rates doesn’t seem drastic, it can actually save you thousands of dollars over the lifespan of your loan. For example, if you purchased a home last year and took out a $250,000 mortgage, you would need to take out a $263,750 loan to pay for that same home today.
Despite these increases, you’d actually end up paying $61 less each month, even if you chose to take out a larger mortgage. This is because today’s rates (2.87%) are significantly lower than they were in 2019 (3.73%). Over a 30-year period, that $61 monthly savings can snowball into almost $22,000!
Bottom Line: Now Is the Time to Buy a Home
If you’re on the fence about making a move during 2020, there’s still plenty of time to secure the perfect home and a low interest rate. Contact a local agent to get a head start on the process, and be sure to ask them for lender recommendations, too.
Need to sell your home before you buy? If you’ve lived in the same house for more than a few years, you may be sitting on thousands of dollars in equity. Ask your agent for a comparative market analysis on your home to see how much it’s increased in value over time.
Work with the Triangle’s Top Real Estate Team
When it comes to buying or selling homes in the Raleigh area, Linda Craft & Team has the expertise you need to succeed. Contact us at 919-235-0007 to put our 350+ years of combined experience to work for you. We look forward to helping you find your dream home at the right price!