Money Matters - Now or Later

Money Matters

Expert Advice on VA Lending & Personal Finance By Phil Jawny, MIRM, CMP, CSP

Now or Later: Determining the Right Time to Buy

Question: The housing market seems so crazy, is now the right time to buy or should I wait until later in 2022?

Answer: This is a great question and while the answer varies somewhat depending on your personal financial picture, there are three important things to consider when you make the decision for your family.

#1 Mortgage Rates:

What are mortgage rates and where are they projected to go in the new year?

In January 2021 the average 30-year fixed mortgage rate in the United States was 2.65%, making it the lowest rate in 50 years. As you might expect, it can’t stay that way. Analysts from both Freddie Mac and the Mortgage Bankers Association expect home loan interest rates to go up in 2022.

The MBA’s quarterly mortgage rate forecast projects the following increases:

• Q4, 2021 — 3.7% • Q1, 2022 — 3.9% • Q2, 2022 — 4.1% • Q3, 2022 — 4.3% • Q4, 2022 — 4.4%

While these are only projections, analysts agree an increase is on the way. For consumers, these seemingly small percentage increases equate to an increase in monthly mortgage payments, depending on the price of the home. The good news is, compared to mortgage trends over the last decade, these are still historically low rates even as they increase in 2022. The rates you see right now won’t last; they will stay low but remember — as they rise so does your mortgage payment.

#2 Home Values:

Will the price of homes rise? Will it be more advantageous to rent or own?

While rates have dropped, home sales have soared and so have home values. The raging housing market may make some potential buyers shy away from entering the ring in hopes that the market will cool off and create more favorable buying conditions. It’s understandable to be cautious and a real estate agent who specializes in supporting military families can help simplify the process if you do decide to consider it. But because it’s still a seller’s market, it’s unreasonable to expect competition to decrease and home prices to dip.

According to CoreLogic, real estate will still appreciate at a faster-than-average rate through late 2021. Home prices nationwide from 2020 to 2021 increased by 18.1%, marking the largest annual gain in home prices in 45 years. A recent report from Zillow suggests more of the same, with home values projected to climb by double digits by summer 2022. That presents an opportunity for homebuyers to benefit from this surge and gain value from their investment faster when combined with low interest rates if they can make a move sooner rather than later.

Likewise, renters should consider rental projections in their area to see if it makes more financial sense to buy. Rent growth in 2021 so far is outpacing prepandemic averages in 98 of the nation’s 100 largest cities, with most seeing double digit increases. When comparing rental payments to mortgage payments at the low interest rates and the projected increases in home values, renters may be surprised that they can own a home for the cost of renting.

This is particularly true when using a VA loan, which includes these benefits: • May not need a down payment • No maximum loan limit *county/city loan limits do apply • Typically provides lower interest rates than Conventional or FHA financing • Lower closing costs • Qualify with lower credit scores and higher debt to income ratios than other loan types • No monthly mortgage insurance • Use your VA loan multiple times

#3 BAH Allowance:

The Basic Allowance for Housing (BAH) is set based on a servicemember’s duty location. Each year that BAH is adjusted to reflect housing costs and align with the market.

The 2021 BAH average increase was 2.9% and the projected increase for 2022 is set to 2.7%. Historically, the BAH increase over the last several years has ranged from less than 1% to 2.5%. These healthy BAH increases can help give military families the best opportunity to buy.

Phil Jawny is a professional lender with 20 years of experience in the business and the founder of GoVA Loans. His industry knowledge is extensive, spanning from loan reorganization to selling and managing VA Loans. Phil has a passion for serving military families. His goal is simple — to help make the loan process easier for families so they can get the loans they deserve and build wealth through real estate without the hassle.

To get ongoing advice or to submit a question for the “Money Matters” column, visit www.facebook.com/Govaloans or follow @ GoVALoans on Instagram & Twitter. Source: MilitaryBenefits.com, HomeBuyingInstitute.com, The National Multifamily Housing Council (NMHC)’s Rent Payment Tracker

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