If you’ve been thinking about buying a home in the DC metro area, 2017 might be the right time to apply for a loan. Given the mixture of mortgage programs available—FHA, conventional, VA and USDA—there’s an opportunity to find a home loan that fits your circumstances. These include zero down programs, as well as programs with down payments as low as 3.5% and 5%. Smaller down payments put ownership within reach, allowing you to stop renting sooner.
According to a recent rent report compiled by Apartment List, Washington, DC is the “most expensive city for renters,” with rent in the DC metro area 0.5% higher than last year. Since rent isn’t getting cheaper, a house purchase makes sense.
If you are ready to build equity, or if you’re tired of yearly rent increases, here are two reasons to purchase in 2017.
Home values can increase, decrease or remain unchanged from year-to-year, When prices are on the upswing, some people put off entering the market until home prices level off or decrease. This approach can work in hindsight, but there’s no way to predict when (or if) home values will stabilize. If you wait too long to purchase a property, you could find yourself priced out of the local market.
The DC metro area is one of the most expensive places to buy a house in the nation. Home prices have been on the rise for the past five years. According to housing data provided by MRIS, the median sale price in the DC metro area for June 2016 was $446,000—up from the median sale price of $380,000 in June 2011. Unfortunately, prices may continue to increase through the region, especially since Zillow predicts home values rising as much as 3.6% nationwide in 2017.
Rising home prices benefit owners looking to sell and cash in their equity, but it doesn’t benefit homebuyers. Qualifying for a home at a higher price will require a higher income and a higher down payment. The sooner you buy, the easier it’ll be to find a property at an affordable price.
If you want to take advantage of a low mortgage rate and buy more house for your money, now’s the time to purchase. In addition to home prices increasing in the DC metro area, you can also expect higher mortgage rates in 2017.
Mortgage rates began increasing in early 2016, approaching the 4% mark. Rates dropped after the British vote to exit the European Union in late June, but they didn’t stay low for long. By the end of 2016, mortgage rates had risen to over 4% for the first time in two years, and rates have continued to rise.
Some mortgage experts predict rates rising to 4.6% by the end of 2017. Granted, rates will still remain low by historical standards. However, any mortgage rate hike increases the cost of buying a home.
For example, let’s say you apply for a 30-year fixed-rate mortgage and borrow $400,000 at 4% interest (4.3% APR, assuming a 5% down payment). In this scenario, you can expect to pay about $1,814 a month (excluding taxes, homeowner’s insurance, PMI and association dues). As another example, let’s say you apply for the same mortgage, but instead of 4%, you receive an interest rate of 4.6% (4.9% APR, again assuming a 5% down payment). With this slightly higher rate, your mortgage payment jumps to $1,948—a monthly difference of $134. For some people, a higher rate can be the difference between buying their dream home and settling on another property.
Interested in learning more about your mortgage options or prequalifying for a home?