Buying a Home in Charlotte...Should I wait?

Are you on the fence as to whether to buy now in Charlotte or wait it out? Thinking home prices may have not dropped completely? Not sure if he federal government will extend the tax credit again? Confident rates will stay low? Well some predictors are speculative. No one has the magic crystal ball that says the prices are going to go down or are on the rise. We try to make an educated guess and hope we are right on it. Congress was pretty clear that they were not going to extend the tax credit again for home buyers. They feel the program has lost the steam necessary to make it effective any longer. I tend to agree with them on this issue. There basically has been some type of house rebate out there for almost two years now. On the last question of rates. Contrary to what a lot of economists and mortgage professionals thought; rates have stayed relatively stable since the first of the year and have not risen like a lot of people expected. But, other changes are on the horizon.

Now, if that was not tough enough for buyers today. The new guidelines by the FHA are going to kick in next month. Now, the FHA backs loans for people who do not have at least 20% to put down on a home. The new guidelines will raise the mortgage premium people have to pay and increase the necessary down payment for people in certain credit score ranges. In addition it will lower the amount a seller can contribute toward closing costs in half. If, and that seems to be a big if, rates were to remain stable when this kicks in the effect can be devastating to potential buyers. The example I was provided with was on a $200,000 house (you can adjust accordingly based on the price of the home you are looking at). If your credit score falls below a certain guideline your down payment percentage increases from the 3.5% to 10%. That would increase by $13,000 a buyer would need to bring to closing to buy that home. In addition the increase in mortgage insurance would add another $1000.00 cost to their mortgage. Then take into account the seller contribution can now only be 3% versus the 6% before.(now typically I see around 4%) closing costs on most of my deals. Rarely do I see 6%. So let figure that $200,000 buyer needs to come up with the additional 1% money. Take 1% and you get an additional $2000.00 in closing costs you have to bring to the table.

Now waiting out the housing market to see if prices lower might be worth the gamble. What might not be is that the same house you want to buy now could cost you an additional $16,000.00 to close that house when the new FHA guidliens go into effect. Will a $200,000 home drop another 8%? That also is factoring that interest rates remain at the low levels they are at right now.....

So, not sure if now is a good time...Consider that the tax credit probably will expire at the end of April if you are not under contract. The standards to get a mortgage and money you need to bring to the closing will increase and no guarantee the interest rates will remain this low.

Dave diCecco

Realtor/Agent

www.davedicecco.com