Is Now the Right Time to Buy a Home?

Is Now the Right Time to Buy a Home?

This is an important question! To assist you in here are a few thoughts for you to consider.

1. Tax Credit: The Government has extended the “first-time home buyer” Tax Credit of $8000 through May 1st 2010. They also added a “long-time resident” home buyer tax credit of $6500. Tax credits are fully redeemable up to the maximum amount even if you did not or will not pay that amount in taxes and neither has to be repaid if you live in the home for three years. (For more information on the tax credit, ask your realtor or give me a call.)

2. Temporary Interest Rate Subsidy: –On November 25th of 2008 the Federal Reserve Bank was authorized to purchase mortgage-backed securities (MBS) issued by Fannie Mae, Freddie Mac and Ginnie Mae (GSE entities). Their goal was to reduce mortgage interest rates and stabilize the mortgage credit market. The participation of the Federal Reserve in purchasing mortgage securities is stipulated to end on March 31, 2010 with their market participation to be gradually reduced beginning in January of 2010. http://www.newyorkfed.org/markets/gses_faq.html (Note: there are other market influences that may also positively or negatively affect interest rates.)

3. What does this mean for you: Timing is Money! For example if you close on a new home before the Federal Reserve stops buying Mortgage Backed Securities you could save on the total cost of your mortgage. A reduction in interest rate of one (1) percent will save you $22,582.93, for every $100,000 of loan amount, over the life of the mortgage. Taking advantage of the non-repayable tax credit will add another $6500 to $8000 to that savings. (Your total savings will vary pending on your actual amount and the date at which you purchase and close on your new home.)

4. Put the doom and gloom headlines in perspective: Most of the headlines you read about the housing market are based on the markets in the Sunbelt states of California, Arizona, Nevada and Florida. Don’t extrapolate the data, research Utah and specifically the county in which you plan on living. The state publishes reports each month, including specific county data, providing both data and their evaluation of the data. For example the following link will give produce an employment report as of Oct 15, 2009 -- http://jobs.utah.gov/opencms/wi/press/2001press/rateoct09.pdf. Review of this data will disclose that the State Workforce Services office believes that “the low point has been reached and the trend forward will now be back up” a signal that timing to buy is good.