Are you looking to purchase your first home? If so, here are three things you should consider.
Your rent is paying someone’s mortgage. For example, say you’re renting a 1-bedroom condo in Kakaako for $2,300/month. That’s $27,600/year or $82,800 for three years. This is money you’ll never see again. Did you know that rental vacancy rates have been declining? This means landlords can increase rent, so investors get a better return.
Say you wanted to purchase a $425,000 condo. With 10% down at an interest rate of 4.6% your principal and interest would be around $1,961/month. If you can afford to pay high rent, you probably can afford to purchase your first home. Unlike renting, owning real estate is an investment. Your property could appreciate and you can build equity.
And yes, you can put down 10% and still qualify for a conventional loan.
We’re still in a low interest rate environment, however, rates are slowly increasing. According to the Mortgage Bankers Association, total mortgage application volume rose 2.9% last week compared to the previous week. With rates rising, prospective homebuyers are looking to lock in sub 5% rate.
If you’re homebuyer, it’s important to speak with your mortgage lender on when you can lock in your rate. Locking in a higher rate could cost you more money in the long run.
Is The Market Cooling Off?
I’ve been showing a lot of properties to millennial, first time homebuyers. It seems like some homes are sitting on the market. In addition, it appears that there has been a bunch price reductions too.
For example, there was a 1-bed/1-bath/1-parking condo unit at Crosspointe listed earlier this year. This property was on the market for 5 days and it sold for $395,000 ($12,000 over the list price).
On the flip side, there’s a 1-bed/1-bath/1-parking condo unit Crosspointe currently in escrow. This property was on the market for 46 days. In addition, the unit was originally listed at $374,000 and had a price reduction to $369,000. It’ll be interesting to see what the condo sells for.
Analysis have said we’re at the peak of our housing cycle. If the marketing is cooling off, homeownership could be more attainable for millennial, first time homebuyers.