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Buy Now Versus Waiting Things Out

How to explore homebuying options by comparing the financial benefits of buying a house now against the cost associated with waiting to save for a 20% down payment.

Realtor opening the door for a couple

If you’re considering buying a house, it’s important to weigh the financial benefits of buying now versus waiting to save for a 20% down payment. While waiting to save for a 20% down payment may seem like a good idea, it may not be the best option in the long run. Waiting until you reach the 20% down payment threshold may produce a huge opportunity cost. Delaying may result in significant costs to buyers due to rising home prices and soaring rents. In the long run, it may be more affordable to buy a home sooner than continue to pay rent while you save for a 20% down payment.

However, it’s important to note that the current mortgage rate environment can also impact your decision. High home prices and high interest rates have made homeownership less affordable, preventing many prospective homebuyers from entering the market. If you’re thinking about delaying your purchase because of the current mortgage rate environment, it’s important to take into account all the potential factors that might also have an impact if you choose to wait.

To explore your homebuying options, you can start by checking out the MGIC Buy now vs Wait Calculator. You can also use their mortgage calculator to estimate your monthly payments and see how much you can afford to borrow. We offer a wide range of resources to help you make informed decisions about buying a home.

Buy versus Wait Tip #1 - Define what affordable means to you

Only you can decide how much you are comfortable paying for your housing each month. In most cases, your lender can consider only if you are able to repay your mortgage, not whether you will be comfortable repaying your loan. Based on your whole financial picture, think about whether you want to take on the mortgage payment plus the other costs of homeownership such as appliances, repairs, and maintenance.

Ask your spouse, a loved one, or a friend about what affordable means to you:

"What’s more important—a bigger home with a larger mortgage or more financial flexibility?”

Buy versus Wait Tip #2 - Choose the right down payment for you

A down payment is the amount you pay toward the home yourself. You put a percentage of the home’s value down and borrow the rest through your mortgage loan. Many first-time homebuyer's make the critical mistake of not calculating other costs like insurance, taxes, and homeowner association dues which leave them in payment shock.

A 20% or higher down payment likely provides the best rates and most options. However, think twice if the down payment drains all your savings! Having a 3-to-6-month reserve of funds can help when the unexpected occur like, a hot water tank failing, or an air conditioning unit that needs replaced.

Putting less than 20% down means you probably have to pay higher interest rates or fees. Lenders most likely require private mortgage insurance (PMI). PMI is an insurance policy that lets you make a lower down payment by insuring the lender against loss if you fail to pay your mortgage. Down payment assistance options can help many people cover the costs of a down payment and closing costs. Down payment money is out there, and we'll help you find it!

"Money is plentiful for those who understand the simple laws which govern its acquisition." - The Richest Man in Babylon

Buy versus Wait Tip #3 - Work with a broker

Brokers are third-party professionals or firms that connect buyers and lenders, so they have access to a wider array of lending options than a loan officer with an individual financial institution. Operating as middlemen, brokers don’t underwrite mortgage loans directly. Their compensation usually comes from lenders on a commission or fee basis.

Stop Renting and Start Building Wealth

I hear from young people all the time telling me that they are waiting for rates to come back down before they pursue buying a home. When you are renting, you are paying a landlord 100% interest for the property. Nothing is going towards a principal balance and as home values continue to rise, no equity is built. There is a saying in the real estate world that many might benefit from hearing, "Love your home, but date the rate."

Here's something else to think about, according to Forbes, there are 25 billionaires on the 2023 Forbes 400 list who primarily owe their fortunes to real estate. It's interesting to note that approximately 90% of millionaires attribute their wealth in part to real estate holdings. Getting started has never been easier than today! Apply online and get a same day answer.

1 Comment

One important topic not mentioned is the fact that many home buyers might have the downpayment, but are waiting for the interest rates to come down. If they wait 1 year for a potential of 1% drop in rate, how much are they missing out on appreciation? When factoring in 5% appreciation of a $325000 house bought today, that is $16,250 of appreciation and thousands of dollars in principal paydown to be missed for a small monthly savings. Moreover, closing costs, downpayment, escrowed taxes and insurance have all increased along with the 5% appreciation, widening the equity gap between today and even just one year! Finally, a home buyer can always refinance into a loan with a more favorable interest…

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