When is the Best Time to Buy a Home

May 15, 2015 ​

With mortgage rates expected to increase, potential homebuyers should consider economic forecasts.

Many economic forecasters say that the U.S. housing market is departing from the days of the 3.50%, 30-year fixed-rate mortgage. The danger for potential homebuyers is that rates could go higher soon. (Currently, Nusenda Credit Union's 30-year fixed mortgage rates start at 3.625%, with a 4.3062% estimated Annual Percentage Rate [APR].)

Here are some examples to consider. If Adela signs a $300,000 fixed-rate, 30-year mortgage at a 4.00% interest rate, she has these payments:

  • Monthly payment = $1,432.25
  • Total payments = $515,609
  • Finance charge = $215,609

If Bob gets a $300,000 fixed-rate, 30-year mortgage at a 5.00% interest rate, he has these payments:

  • Monthly payment = $1,610.46
  • Total payment = $579,569.69
  • Finance charge = $279,769.69

Bob will pay $63,960.69 more for his 5% mortgage rate, compared to a 4%, over the life of the loan.

Buying a home. While rates have been in decline, the big picture shows a rise in rates by the end of 2015. So, should homebuyers act now, with rates still fairly reasonable, or should they wait and risk having to deal with mortgage rates as high as 5.00% or 6.00% in a year, lowering their overall purchasing power? Freddie Mac expects the average rate for a 30-year fixed mortgage to reach 5% by the end of 2015.

For the last five years, the Federal Reserve has embraced a policy of low interest rates, primarily by buying up securities in the U.S. mortgage market. But some say the Fed will ease off those purchases, thus driving interest rates up. Tim Lucas, editor-in-chief of the mortgage website MyMortgageInsider.com, says that "when the Fed stops buying, demand for these securities will fall dramatically, and rates will jump back up to typical levels."

A local realtor explains the value of mortgage investment. "There is not another investment that truly gives back as much as real estate. Starting with a person's personal residence and certainly true with investment real estate, there are many advantages such as equity buildup, principal pay-down, long-term appreciation, tax advantages, leverage and, in the case of investment properties, cash flow," said Paul Wilson, an Albuquerque real estate broker and president of the Greater Albuquerque Association of REALTORS®. "All of these issues are true over time; they are especially true now in 2015 in the Albuquerque metropolitan area with the convergence of historically low interest rates and still-depressed prices of local real estate, both residential and commercial."

One of the most useful things you can do once you've made your decision to buy is to get pre-approved for your mortgage. Realtors often require pre-approvals and sellers will know that you are presenting a strong offer, which can expedite your offer process. To get pre-approved, you can apply online or call 505-855-5950 for an appointment.

Possibly the most important consideration: The perfect time to buy a new home is when you are financially and emotionally ready for that obligation – likely the biggest financial investment of your life.

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