Homeownership has always been the best path to financial security.
Think of it as a forced savings account; each month you make your mortgage payment, your principal balance decreases, increasing your equity.
But, with the current political uncertainty with the China trade war and global economic slowdown, you may be wondering if now is still a good time to purchase a home.
In this article, we’re going to lay out our thoughts on the matter.
Mortgage Rates are Decreasing
Recently the Fed announced that it would be cutting interest rates by a quarter basis point, with more cuts coming later this year. As a result, mortgage rates have been on the move lower over the past few months.
Lower interest rates mean a couple of things.
- Can afford to buy a more expensive home
- Payless interest
Getting Approved for a Mortgage is Easier Again
After the housing crisis in 2008, the Government stepped in and started heavily regulating the mortgage industry. These regulations made it much more difficult to get approved for a mortgage loan, especially for borrowers with low income or bad credit. But, in the past few years, mortgage requirements have loosened, making it easier to qualify.
For borrowers with at least a 580 credit score may qualify for an FHA home loan. FHA loans are mortgages that are insured by the Government.
If a borrower defaults on a Government-backed mortgage, the lender will be reimbursed. This allows lenders to loosen their loan requirements, opening up home loans to more people.
2020 FHA Loan Requirements
• 580 credit score with 3.5% down
• 500-579 score with 10% down
• Maximum 50% debt-to-income ratio
• Two years of stable employment and income history
• For primary residence only
• 24 month waiting period after a foreclosure or bankruptcy
• 1% of student loan debt added to DTI ratio
Home Prices are on the Rise Again
Home prices started to surge about 5 years ago as the housing market picked back up. However, home prices for the last couple of years have stalled, but that looks to be changing again.
According to CNBC, home prices have risen by 3.6% from July 2018 to July 2019. This is a trend that is expected to continue into 2020.
Even with some of the uncertainty in the political world, such as the trade war, times are ripe to be a buyer in the housing market.
Interest rates are at historically low levels. Getting a mortgage with a low rate you can lock in for the next 30 years should be very appealing. Add that home prices are rising and will continue to do so, and the answer is pretty simple.
Yes. Now is a great time to buy a house!