Is This the Right Time To Buy For You?

February 15th, 2010

Economic conditions may make you feel rushed to buy, but consider your own circumstances, and use mortgage calculators to help you weigh this important decision.

With the prices, interest rates, and incentives in today’s housing market, you might feel a sense of urgency to take the plunge. But while it’s important to follow interest rates and prices, consider your own financial situation to determine whether this is the right time for you to buy. Mortgage calculators can help.

Mortgage Rates to Go Up?

Favorable conditions for buyers won’t last forever. Economists project that mortgage rates, which have hovered near or at record lows in 2009, will likely go up in 2010 as the Federal Reserve ends its program to buy mortgage-backed securities, a strategy that has kept mortgage rates down. Meanwhile, the federal government’s home buyer tax credit will expire on July 1, and the Federal Housing Administration plans to tighten borrower requirements for FHA-insured mortgages.

So should you buy now? Follow these steps to help you decide:

• Use a Savings Calculator

Evaluate your savings to see how much you have for a down payment. Conventional loans require 20% down, but you could qualify with a lower down payment if you purchase private mortgage insurance or get a loan insured by the FHA or Veterans Administration. If you don’t have enough saved, use a savings calculator to determine how much you’ll save by a certain date, given your monthly deposit, interest rate, and term.

• Get Free Mortgage Rate Quotes

Get free mortgage rate quotes to see what rates might be available. There’s no obligation, and the quotes will give you a general idea of loan costs.

• Learn More with Home Affordability and Prequalification Mortgage Calculators

Use a home affordability calculator and the prequalification calculator to get a feel for the size of loan you can afford. With the affordability calculator, plug in the amount you think you can pay each month for a mortgage, the interest rate, and repayment period. Your housing costs, including mortgage payment, real estate taxes, and homeowners insurance, should not exceed 30% of your gross monthly income. All your monthly debt payments, such as car loans, mortgage and revolving debt, should be under 38% of your gross monthly income.

The mortgage pre-qualification calculator will indicate how much you can borrow by analyzing your income, assets, and mortgage rate.

• How Much Will Your Payment Be? Use Loan Payment Calculator

You can also use a mortgage payment calculator to see how much your payments would be for specific loan amounts, terms, and interest rates.

These calculations can’t make your decision for you about whether to buy, but they can serve as starting points for weighing your options.

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