If you’re thinking about giving up on purchasing a home, don’t! Even with the current market conditions, you can still find a home that you love and one that you can afford.
Many potential homebuyers think that the biggest factor that goes into purchasing a new home is how much cash they have to put down, but truthfully, the measure for affording a home isn’t just based on the down payment or even the purchase price. The key is whether you can make your monthly mortgage payment without feeling stressed about it. And with the historic low interest rates, many people are discovering that their next dream home is within reach, and might not be as expensive as they thought.
Affordability Increases your Purchase Power
Three main factors go into determining how affordable homes are for buyers:
- Mortgage Rates
- Mortgage Payments as a Percentage of Income
- Home Prices
In regards to affordability, The National Association of Realtors (NAR) produces a Housing Affordability Index, a tool that measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national and regional levels.
For reference, this score is based on the most recent listings price and income data and assumes a 20% down payment and a 25% debt-to-income qualifying ratio.
Low Mortgage Interest Rates
In case you haven’t already heard (but you’re here on this blog, which means you most likely have), mortgage interest rates have hit, and have remained, at historic lows. Lower interest rates mean lower payments. For current homeowners who don’t wish to sell, it’s prompted a surge in mortgage refinances. (And if you haven’t already, we highly recommend seeking out a lender to start the process!)
For buyers, more specifically those who are serious about moving forward with their home search amid these uncertain economic times, are benefitting from the very same low rates. In fact, it’s more affordable to buy a home today than at any time in the last eight years, due to the historically low mortgage rates, which are more than offsetting the rising home prices.
For example, in March, The South was the second most affordable region with an index of 181.9 (median family income of $87,224 and the qualifying income of $47,952), and from the previous month, The South region increased the affordability by 2.2%.
Why Rent When Homes Are So Affordable?
Currently, the lowest priced home for rent in Cherokee County is around $1700 a month. With this figure in mind, why rent when you can buy these homes for about the same monthly mortgage payment? Furthermore, the median rent in Cherokee County (as of June 2021) is around $2,000 a month. That would be a purchase price of $375-$425,000 for around the same payment. Currently, there are over 60 homes listed in Cherokee County that match these criteria. Of course, your payment will vary based on your loan type, but this should help you reframe your thoughts about affordability as it relates to your home search.
We understand that sometimes renting is merely a short-term solution before longer-term transitions in life, but for those who rent because they think owning a house isn’t an option, our team would love to work with you to find a house that checks off all your boxes — and allows you to make a home.
Timing Matters in Your Home Purchase
If you’re ready to buy, purchasing a home this summer may save you a considerable amount of money over the lifetime of your home loan based on historical and current affordability trends. By taking time to understand how affordability plays a substantial role in the overall cost of your home, you can take advantage of the current mortgage rates sooner rather than later.
Still have questions about mortgage interest rates, affordability, and whether purchasing a home is part of your plan in 2021? In everything we do, our goal at Path & Post is to guide potential future homeowners in a way that allows them to make the most of their real estate transactions. Reach out to any of our real estate specialists to get started — we are your post to lean on as we guide you along the path to a new beginning!