Now may be the best time to purchase a home

If you are mortgage-ready, you may want to buy now.

Many people have a false idea that due to the bursting of the housing bubble where housing prices tumbled, housing prices are still at rock bottom lows. This is the furthest from the truth. According to the Federal Housing Finance Agency’s current Housing Price Index (HPI) report, current home prices across the United States rose 0.5 percent in August 2014 alone; from the August 2013-August 2014 reporting period, home prices in the United States rose 4.8 percent. Depending on the city, its amenities and other cost-of-living factors, the home price increases have rose as much as 20 percent year-over-year in some areas.

Four point eight percent does not seem like much of an increase. However, if one were looking to purchase a $100,000 home in August 2013, that same home in August 2014 would cost $104,800. Combine this with interest on a mortgage and that increase could result in tens of thousands of additional dollars having to be paid over the life of the loan.

In addition to rising home prices, interest rates are still at some of the lowest levels that have been seen in 30 years. Current 30-year Conventional Fixed Mortgage rates are around 4.125 percent. This equates to a monthly payment of $388 without taxes and insurance on a $100,000 home with a $20,000 down payment.

While interest rates are low, there is no guarantee they will stay low. If the interest rate were to increase from 4.125 percent to just 5 percent, that same 30-year conventional fixed rate mortgage would cost $536.82 per month. This results in an additional $148.82 per month, $1785.84 per year and an additional $53,575.20 over the life of the 30-year loan. offers a mortgage calculator to provide an estimate of what the monthly payment would be for a mortgage you are considering. Please be advised that the online calculators are an estimate of what the interest rate and payment would be. Factors such as your credit score, income and program requirements could greatly affect your final interest rate.

In today’s market, foreclosed homes are no longer the rock bottom bargain they once were. They are increasing in price at similar rates to occupied homes, yet many times need extensive repairs.

New homebuyers would benefit from contacting a Realtor to understand the pricing and housing market in their area. Just because a home sold for one price two years ago does not mean that home is still at that price. It may have gone up in value and price significantly.

Michigan State University Extension offers homeownership seminars to help potential homebuyers understand the home buying process.

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