Knoxville Real Estate Insider - Buy Now or Wait?

Issue #003

22 Jun

In this Knoxville Insider Issue…

🌤️ Real Estate Edition - Generational Trends in Home Buying and Selling

❔ Answers to Reader-Submitted Real Estate Questions
 

Buy Now or Wait?

Considering buying a home but concerned about mortgage rates? Focus on what you can control and take the leap! 

You're hearing a lot about mortgage rates right now, possibly from headlines about the recent Federal Reserve (the Fed) meeting and its impact on rates. Despite what these headlines suggest, mortgage rates are influenced by many factors such as political uncertainty, inflation, and economic conditions. Predicting when these factors will align favorably for lower rates is challenging. That's why trying to time the market isn't generally advisable. There are too many variables beyond your control. Instead, focus on what you can manage. 

Here's what you can influence to make your plans to move forward: 

Your Credit Score Your credit score plays a significant role in determining your mortgage rate. According to CNET: "You can ensure the best rate for your situation by improving your credit score. Lenders use your credit score to decide loan approval and interest rates. A higher credit score can secure a lower interest rate, possibly better than the average." Maintaining a good credit score is crucial now to secure the most favorable rate possible. Consult with your trusted loan officer for personalized advice on boosting your score. 

Your Loan Type There are several types of mortgage loans available, each with different terms. The Consumer Financial Protection Bureau (CFPB) notes: "Mortgage loans fall into categories like conventional, FHA, USDA, and VA loans. Lenders offer various products with different eligibility criteria. Rates vary significantly based on loan type." When working with your lender, explore available options and determine which loan types suit your circumstances and qualifications. 

Your Loan Term The term of your loan is another important factor. Freddie Mac advises: "Consider the loan term, which determines how long until you fully own your home. Your loan term impacts your interest rate, monthly payments, and total interest paid over the loan's life." Choosing the right loan term can also affect your mortgage rate depending on your situation. 

In summary, while you can't control broader economic factors, you can manage aspects within your reach. 

The Cost of Waiting 

Projections show that home prices in the Knoxville area will continue to increase. When rates come down, more buyers will enter the market. More competition = increased home values 

Do the Math 

A $450,000 home today with 10% down @ 7% rate = $2,694/month (principal, interest, taxes and insurance) 

The value of that same home next year is $485,000 + more buyers (bidding war) = increases the value $500,000.  

That $500,000 home with 10% down @ 6% rate = $2,697/month (principal, interest, taxes and insurance) 

If that home is purchased now ($450,000 @ 7%) and refinanced at 6% in 1 year, the payment drops to $2,428 ($269 less than if you wait a year). 

So, the cost of waiting = missing out on $50,000 in equity and a reduction in monthly payment (saving you $3,228/year) 

A special thanks to Tiffany Walker at Elite Service Mortgage for providing this great information to our readers. You can reach Tiffany at (865) 591-7065 or [email protected] 

Ask a Realtor😀 

Thank you to our readers for submitting the questions below!

Question 1: I am looking for rent to own homes. How do I find those? (submitted by Ann)

Finding legitimate rent-to-own homes in today's market is challenging, if not impossible. Although you might come across a few advertised, be cautious as many of them are scams. Rent-to-own options are more common in slower housing markets, which isn't the current situation in Tennessee. I recommend contacting a lender to explore options for purchasing a home instead. 

Question 2: What are your thoughts & recommendations for building envelope performance testing for water air and water leaking? (submitted by George)

Building envelope testing (BET) is a method used to detect air, water, or thermal leaks within a building's interior and exterior. It’s commonly conducted on new constructions and renovations. Testing is recommended to help ensure a building safety, durability, and energy efficiency, and can identify issues before they become expensive problems.

This Real Estate Edition Issue brought to you by Barbara Newton

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