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When is the Right Time to Buy or Refi?

If you’ve been sitting on the fence wondering when is the right time to buy a home or refinance the one you’re in, you’ve most likely been waiting at least a year. In 2023, mortgage interest rates topped out at more than 7% APR, which made borrowing money for a home loan more expensive. This also led to decreased home purchases and refinances, further impacting buyers already facing an existing shortage of homes for sale.

The good news is that there could be better opportunities in 2024. Be ready for them by learning more about the housing market so you’ll know when it’s the right time to buy or refinance for you.

Mortgage Rates

Buying a home typically is the largest purchase that a person or couple will make during their lifetimes. For most, that will mean borrowing money from a lender and paying it back monthly, plus interest. In today’s market, interest rates are at the highest they’ve been over the past three years. Higher interest rates cost you more over the life of your home loan and will leave you with a higher monthly payment, which may discourage buyers and refinancers.

Zillow research found that rates hovering around 4% to 5% would get individuals to buy a home. Historically, rates have remained at or above 6% in each decade, with the exception being in 2021, when rates dropped to 3% and lower. If you want to buy or refinance a home, consider what you can afford when you factor in the rate you receive on your mortgage.

Home Prices

A home’s selling price is a key factor for buyers. Pay close attention to the median home prices in your target area and evaluate how much home you can afford. Remember that your interest rate, principal payments and possibly home insurance and property taxes will be combined into your monthly mortgage payment. Use online mortgage calculators and consider everything to determine if a home purchase is possible at this time, according to USNews.com.

Home Inventory

Home prices fluctuate and are based on available inventory, a home’s condition and style, its location, recent home sales in the neighborhood and buyer demand. If there are more buyers than available homes on the market, prices are pushed up because single properties will get multiple bids, often above the original asking price. This makes it hard to get a fair market price.

Consider researching property listings in your desired neighborhood to see where the home inventory stands. If there are fewer homes for sale than average, that could mean there’s a possibility of being outbid on offers. That may change this year. According to Realtor.com, construction of new homes could have a slight increase in inventory in 2024.

The Best Time to Buy

Taking the leap in homeownership will depend highly on your comfort level and your financial standing. Market conditions can be a deterrent to buying because there are several factors that could cause both home prices and interest rates to fluctuate in a very short time. Consider home prices, interest rates, how long you plan on living at the home and how much you can afford before making a decision. If you’re financially ready to buy and comfortable doing so, there’s really not a bad time to buy, according to USnews.com.

What Is Home Refinancing?

If you’re a current homeowner with a mortgage, you can find a lender to refinance that mortgage to take advantage of a lower interest rate, a shorter loan term or to take out cash via the equity or value you’ve built up in your home. Deciding when the time is right to refinance will depend on those factors, too.

If you’re considering refinancing for a lower rate, ensure that the interest rate you’re targeting is at least 1% lower to make it worthwhile. If you decide to refinance to tap into the equity of your home to take cash out, keep in mind that this may increase your monthly mortgage and/or lengthen the term of your loan. The bottom line is ensuring you are comfortable and financially able to manage the new terms and monthly payments, says Investopedia.com.

TCU Can Help

As your local community lender, Travis Credit Union can help you with buying a home or refinancing your current loan. Our knowledgeable team of mortgage loan officers will find the right loan to fit your needs and stay in touch with you throughout the loan process.

If you’re curious to see what your mortgage payments may be, you can use our free online calculators at traviscu.org to help you plan. Start by visiting TCU’s online Mortgage Hub.

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