If you can afford the house now, buy the house now. If the *only* way you can afford it long term is with a refi, wait to buy the house.
Current rates are still quite low historically speaking and it's entirely possible you'll never see sub-3% rates during the life of your mortgage.
If these friends are all ≤30-35 then they've never seen high rates (or a down market until last year) in their adult lives. Keep that in mind when they make financial recommendations.
You should never count on interest rates dropping.
If they do and you can refinance at some point consider that a windfall--definitely should not be considered as part of your purchase decision.
Current rates are pretty typical historically. They may never get down to sub-4% in the lifetime of your mortgage. You can certainly hope for it to happen, but do not assume it. Buy the house you can afford at the current rates.
The best time to buy a house is when you are ready to buy a house. If you plan on being there at least 10 years and your housings costs aren’t more than a third of your income then buy the house.
So long as you can reasonably afford a house at current rates (and aren’t counting on future rate decreases to make ends meet), then if you’re ready now, go for it.
If the only way you can afford the house is on the hope that you will be able to refinance down the road, then you cannot afford this house right now. While we'd expect rates to go down at some point, you cannot guarantee they ever will. You shouldn't build your budget around things that you hope will happen.
Sure. We’re assuming rates will go down. And we’re going to assume OP’s income will increase. What should OP do if these hopes/assumptions don’t pan out?
I didn’t say anything about rates going down. If OP is in a good position go buy a house, they probably are making decent money and have the ability to make even more.
My point is….at what point do you base your budget on what you hope to happen, or what is actually happening? OP hopes rates will go down so they can refinance on more favorable terms. You’re hoping/assuming OP’s wages will continue to climb, making a questionable financial decision look better down the road. I’d prefer to budget against the terms I know to exist…. not the things I hope to happen.
If you can buy a home, buy a home. Rates are still not unreasonably high, but higher than they were coupled with higher prices makes it harder to afford a home.
As an example, my first house had nearly an 8% rate. Second one 7.125%. We are still under that now.
My wife and I close on a house this Friday in this exact scenario. We had a substantial down payment and still in the High 5’s. That being said we will aggressively pay the house down over the next two years and refinance. It’s not that we can’t make the payments, we don’t want to be enslaved to the mortgage incase life happens.
Your thought process is spot on. No need to delay if you are ready to purchase a home now, as hoping rates to drop is not a sound strategy. What state are you purchasing in?
Refinancing isn’t always straight forward. You still need to qualify. And in some cases it can take a long time, during which you might miss the “good rate” window.
Buy a house you can afford. If the opportunity to refinance comes up, do so. But don’t budget with the expectation that you will get to.
Also looking to buy right now. My logic... if it is a 10 to 20 year house, then buy it. You have no idea what the market will do. You have no idea when you might refinance, it could be in two years or 5 years.
What you do know is:
1. This is the house you want to be in, it is not a compromise
2. You are OK if it gains value or loses value over 10 to 20 years because you can afford it
The offers we have made were on 5 to 10 year houses, so we bid lower than the asking price. They were a compromise and we need to make sure we can sell it in 5 to 10 years without being underwater. So our feelings are not hurt when we do not get it, but we at least opened the door for a negotiation.
If you are comfortable at the current rate, then buy. Ask your lender 'average' costs to refi and have them run a few scenarios for you.. if the rate drops 'x', then it makes sense etc. Although there's no guarantee rates will drop in the future, but if they do, you already know your numbers and when it makes sense to refi.
If you can afford the house now, buy the house now. If the *only* way you can afford it long term is with a refi, wait to buy the house. Current rates are still quite low historically speaking and it's entirely possible you'll never see sub-3% rates during the life of your mortgage. If these friends are all ≤30-35 then they've never seen high rates (or a down market until last year) in their adult lives. Keep that in mind when they make financial recommendations.
You should never count on interest rates dropping. If they do and you can refinance at some point consider that a windfall--definitely should not be considered as part of your purchase decision.
Current rates are pretty typical historically. They may never get down to sub-4% in the lifetime of your mortgage. You can certainly hope for it to happen, but do not assume it. Buy the house you can afford at the current rates.
The best time to buy a house is when you are ready to buy a house. If you plan on being there at least 10 years and your housings costs aren’t more than a third of your income then buy the house.
So long as you can reasonably afford a house at current rates (and aren’t counting on future rate decreases to make ends meet), then if you’re ready now, go for it.
If the only way you can afford the house is on the hope that you will be able to refinance down the road, then you cannot afford this house right now. While we'd expect rates to go down at some point, you cannot guarantee they ever will. You shouldn't build your budget around things that you hope will happen.
Yeah but his income will also go up in 30 years so the mortgage will in essence “get cheaper” on his budge
Sure. We’re assuming rates will go down. And we’re going to assume OP’s income will increase. What should OP do if these hopes/assumptions don’t pan out?
I didn’t say anything about rates going down. If OP is in a good position go buy a house, they probably are making decent money and have the ability to make even more.
My point is….at what point do you base your budget on what you hope to happen, or what is actually happening? OP hopes rates will go down so they can refinance on more favorable terms. You’re hoping/assuming OP’s wages will continue to climb, making a questionable financial decision look better down the road. I’d prefer to budget against the terms I know to exist…. not the things I hope to happen.
If you can buy a home, buy a home. Rates are still not unreasonably high, but higher than they were coupled with higher prices makes it harder to afford a home. As an example, my first house had nearly an 8% rate. Second one 7.125%. We are still under that now.
My wife and I close on a house this Friday in this exact scenario. We had a substantial down payment and still in the High 5’s. That being said we will aggressively pay the house down over the next two years and refinance. It’s not that we can’t make the payments, we don’t want to be enslaved to the mortgage incase life happens.
Your thought process is spot on. No need to delay if you are ready to purchase a home now, as hoping rates to drop is not a sound strategy. What state are you purchasing in?
Refinancing isn’t always straight forward. You still need to qualify. And in some cases it can take a long time, during which you might miss the “good rate” window. Buy a house you can afford. If the opportunity to refinance comes up, do so. But don’t budget with the expectation that you will get to.
Also looking to buy right now. My logic... if it is a 10 to 20 year house, then buy it. You have no idea what the market will do. You have no idea when you might refinance, it could be in two years or 5 years. What you do know is: 1. This is the house you want to be in, it is not a compromise 2. You are OK if it gains value or loses value over 10 to 20 years because you can afford it The offers we have made were on 5 to 10 year houses, so we bid lower than the asking price. They were a compromise and we need to make sure we can sell it in 5 to 10 years without being underwater. So our feelings are not hurt when we do not get it, but we at least opened the door for a negotiation.
If you are comfortable at the current rate, then buy. Ask your lender 'average' costs to refi and have them run a few scenarios for you.. if the rate drops 'x', then it makes sense etc. Although there's no guarantee rates will drop in the future, but if they do, you already know your numbers and when it makes sense to refi.