Why Buying a Home Should Be Your New Year's Resolution
- Jan. 14, 2016
- Courtney Lynch
- Home Life
You have been planning your ideal home for years, daydreaming about the colors of the bedroom walls, the sleek design of the kitchen counters and the plush backyard where your kids can throw a tennis ball for the dog. It's a perfect picture, only you have not yet been able to make it happen.
If you are like many others out there who can't stop postponing the start of your home buying process, 2016 is the time to make the plunge. The real estate market continues to get healthier and healthier, so why not take advantage of it? It's time to make it official: your New Year's resolution should be to finally find your dream home in 2016!
Why 2016 Will Be a Good Time to Buy
Experts agree the rate of home appreciation will slow down in 2016. While home prices will continue to rise, they will only do so at a rate between 3 and 4.5 percent, according to The New York Times. Jonathon Smoke, chief economist for Realtor.com, told CNN that this slowing of home appreciation will be very appealing to buyers and is likely going to lead to hordes of new people searching for homes.
Smoke also told CNN he predicts a huge increase in available inventory this year. The slowdown of home appreciation will make more homeowners open to selling, which could lower home prices even more. In addition, buyers will have more homes to choose from and are less likely to end up paying more due to a bidding war. There will also be increased availability of new homes for first time buyers because builders have begun to focus on building more starter homes.
Buying vs. Renting
The buyer's market will also be far better than the renter's this year. Rent prices continue to rise and, in the majority of U.S. cities, buying a home is actually cheaper than renting. Ralph McLaughlin, chief economist for Trulia, told CNN interest rates would have to reach about 6.5 percent nationally for the cost of buying to equal that of renting.
New government initiatives have also been established to help homebuyers this year. The Times praised the Fannie Mae HomeReady program, which lets borrowers incorporate income from anyone who lives in the house, even if they are not named on the mortgage. It also allows those who don't live in the house to contribute to the mortgage as co-borrowers. Realtor.com mentioned the Fannie Mae and Freddie Mac Home Possible Advantage Program. This program only requires a 3 percent down payment and will allow those with credit scores of 620 or higher to qualify for a loan.
Interest rates are slowly rising, but experts agree that interest rates are probably the lowest they will be this year. In other words, now is definitely the time to buy.
How to Prepare to Buy a Home This Year
Now that you have decided buying a home is the perfect New Year's resolution, it is time to make sure you have your finances in order. Do everything you can to make sure your credit score is in tip-top shape and to reduce your debt-to-income ratio. According to Realtor.com, it is common for credit scores to contain errors, so make sure to triple check your report and report any inaccuracies. Make sure you have saved up enough for a down payment, applied for mortgage pre-approval to know how much home you can afford and are saving up money to pay the closing costs.
According to the Times, the fact that interest rates will rise throughout this year will cause buyers to start searching earlier than normal. Winter could see the type of market spring generally does, so if you want to have the best options it's best to start looking as soon as possible. What are you waiting for? There is no time like the new year to start a new life.