Buy Now? Or Save for Later?

Well you have made it this far in your home buying process. You have probably started telling everyone you know that you are thinking of buying a house. It is a big deal, you should be telling people about this exciting step in your life.

You have worked hard and started putting away a little cash for your down payment. But hold on just one second! Your parents and family members might be telling you to pump the breaks and think about this decision for a minute. I'm here to tell you that the advice you are receiving might not be the best plan of action.

One of the biggest objections for a first-time home buyer is "I am saving up until I have 20% for my down payment"

A generation ago this might be viewed as a best practice, but with the increase in the value of property and lack of increase in wages might make saving for a down payment seem unrealistic.

The average price of a home in 2017 for a single male or female first-time buyer is $151,650 according to an annual study produced by the National Association of Realtors. If you were to save for a down payment on the average home, you would need to put away about $30,000 which is overwhelming for most.

While saving up for a down payment is important, it is not the end all be all when you are buying a house. In fact, the average down payment for all homebuyers is only 11% ($16,681) and for first time home buyers only 6% ($9,099) which is much less overwhelming to think about when you are buying your first house. You can even make your purchase of your $150,000 for as little as 3% down! ($4,549).

If you are close to buying a home and want to save up just a little longer it might cost you more in the long run. The Fed has announced planned increases to the interest rates and they have already gone up this year with more increases planned later in the year. When interest rates go up, the amount of home you can afford goes down.

MAX Purchase Price Based on 20% Down Payment

MAX P&I 4.50% 5% 5.50% 6%

1000 $ 245,000 $ 235,000 $ 219,000 $ 208,000

1200 $ 295,000 $ 280,000 $ 265,000 $ 250,000

1400 $ 345,000 $ 325,000 $ 310,000 $ 292,000

1600 $ 395,000 $ 372,000 $ 350,000 $ 335,000

1800 $ 445,000 $ 420,000 $ 395,000 $ 375,000

2000 $ 495,000 $ 465,000 $ 440,000 $ 415,000

(This table is for demonstrative purposes only. Actual qualified terms may vary. Please speak with a licensed mortgage professional for assistance.)

If you wanted to keep your monthly payment around $1000 and are thinking of postponing your search until next spring it could actually cost you as much as $37,000! That is a lot of money to a first-time homebuyer if you ask me. With our current market conditions, despite the increase in mortgage rates demand remains strong. This combined with low inventory in Southeast Michigan is sure to see values peak higher over the next year.

Buyers who make the move now, will be able to afford more house for less, even while paying less for your home in the first place.