What to Know About Buying a Home
Forbes notes that low inventory could be partly due to the many house hunters who purchased while home loan interest rates were low. Those buyers seem to be hanging on to their homes for the long haul, at least from the perspective of the article. The lack of supply and persistent demand are still factors in the last months of 2023.
What do you need to know about home buying in today’s housing market?
Housing Market Trends Are Cyclical
Prices may be high, and interest rates may be high when you first start looking at your options. But over time, the market forces that created these conditions will change.
Once they do, property values may increase over time. Those who purchase a home today have that to look forward to, it’s just a matter of when.
The additional money you pay today in interest may be offset later if you sell in a recovering housing market where property values are back on the rise.
All that said, there is no accurate way to predict when that recovery cycle might begin. Smart house hunters make a plan to deal with the current higher rates (refinancing, selling) instead of crossing their fingers and hoping for the best.
The House You Buy Today Begins Building Equity Right Away
Your down payment is part of starting the process of building equity, which is the cash value of your home at the given moment based on how much you still owe and how much you have paid.
That is not the only factor in the calculation since competition and the current state of property values in your area may also affect the amount of equity you have.
If you buy today and the market begins improving next year, you already have a decent number of months of paying on the mortgage on the books; your equity may be higher because of that alone. The longer you wait to sell or refinance, the potentially better off you could be.
Refinancing Later Is an Option
Some borrowers need to buy now and don’t want to sell or get an FHA cash-out refinance to take equity out of the home later on. An FHA simple refinance (when rates begin to fall again) may help get you into a lower interest rate. An FHA streamline refinance loan is another no-cash-out way to get a lower rate, a lower monthly payment, or both.
At press time, the FHA streamline refinance option isn’t viable for those who purchased before home loan interest rates reached higher levels. But once those rates fall back down to lower levels, the FHA streamline refi option may make sense for many applicants.
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