Buy Now or Pay More Later? When is the Right Time to Buy a Home?

Sheryl Landrum
LoanBiz Columnist


When considering whether to buy a new home or wait for a better price, you need to consider what is happening with home mortgage interest rates as well. Failure to consider how rates are moving can leave you with a higher mortgage payment even when home prices are falling.

Inflation Rates Affect Ability to Buy

Inflation is on the rise and as many of us are aware, the Federal Reserve has increased the prime rate seventeen times in two years. For mortgage loan holders with adjustable rate mortgage loans, the increase in payments has been noticeable. For example, for every $100,000 in mortgage liens a 1% increase in rates translates to an extra $67 in monthly mortgage payment. For a $500,000 mortgage loan, that translates to an extra $335 a month or $4,020 a year. If we look at a buyer who is paying 20% down on his home purchase, we would need the home sale's price to drop $60,000 and the mortgage loan amount to drop by $48,000 to make up the 1% difference in interest rates. That’s a lot of reductions!

Don't Wait To Buy

So, if you are waiting for home prices to drop to make your best deal, think again. Do yourself a favor and talk to your loan officer or other home mortgage financial advisor and take a look at current market rates. In the long run, our homes are generally our biggest asset, tax deduction, and greatest appreciator. So when considering if now is the right time to buy that new home, remember long-term benefits should outweigh short-term concerns.

About the Author
Sheryl Landrum is a Senior Loan Officer with First Capital Mortgage in San Diego and Prudential Realty in Bonsall, California.