September 22, 2011

Our Home Search Continues

Back in March I mentioned that my wife and I were home shopping.  At that time we'd already looked at over a dozen homes.    Since then I've lost track of the houses we've looked at.   Our home shopping has been on and off over the past few months.   We put the shopping on hold at the start of summer since we were simply too busy to look for houses or buy a house and move.  The market here has been pretty stale in the last month or so.  There are few houses coming up for sale.    Unfortunately we still haven't found any homes that really fit our needs.  

Prices up marginally
The average sales price in the ZIP code we're looking at has gone up from $164 / sq ft to $166 / sq ft.   We're looking at homes around 2500 sq ft so that equates to a $5000 increase.   Not much of a change for homes in the $400,000 range really especially given that the summer is the high season for home buying and selling.

Interest rates dropped considerably
Interest rates have dropped a full point since we started looking.  I have an old quote from our mortgage broker back in February listing a mortgage rate of 5.1% and today it should be easy to get 4% rate.

Our cash savings have grown 

We've saved up about $30,000 more cash compared to when we first started looking at houses back in February.   Thats more money we could use towards a downpayment and/or keep in our emergency fund.

Lets look at buying a 2500 sq ft house at average sales price.

February 2011 :
Cash on hand $120,000
Home cost = $164 x 2500 = $410,000
Mortgage rate 5.1%
Down Payment = 20% of $410,000 = $82,000
Mortgage payment = $1,780
Cash left = $38,000

Today :

Cash on hand $150,000
Home cost = $166 x 2500 = $415,000
Mortgage rate 4%
Down Payment = 20% of $415,000 = $83,000
Mortgage payment = $1,585
Cash left = $67,000

The drop in mortgage rates means that buying a similar home today would give us a mortgage payment that is $195  less per month compared to back in February.   Thats a big deal.

Plus since we've saved up more money over that time period in cash we could buy a house now and have a lot more left in our savings account.   Thats a big deal.

Its actually a good thing for us financially that we haven't found a house yet since the mortgage rates have dropped so much.  We can now buy a lot more home for the same money or buy the same home for less money.

We do not 'need' to buy a bigger home now.   Thats given us a lot of flexibility to be picky in our house hunting and wait for a home that we really like rather than settle for the best home available. 

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