Is this a good time to buy a home? That question is being asked right and left. And it is a valid question – after all, a lot has changed in the housing market. That change has created a perfect storm to buy a home. But is homeownership right for you?

Here are a few reasons why NOW is a great time to buy:

Home Prices are Lower
The Case-Shiller Index is a widely recognized index and measures price changes by markets. Their most recent report, which was released in December indicated home prices are 8% lower from the previous year for the 20-city composite. The report lags behind the time period measured with Decembers report representing sales data thru October.

Mortgage Interest Rates are Lower
We’ve been beating this drum for a while, but the beat still holds true.  Mortgage interest rates continue to trend just slightly above the lowest point in history. However, as the economy improves, mortgage interest rates will begin to creep higher.

Cost of Owning is Lower
Overall the cost of homeownership is now less expensive than it’s been at any time since 1963…whoa! Let me explain. The graph below shows the principal and interest payment on a median priced home as a percentage of individual income for each year.
Here are the assumptions:

• 20% down
• Prevailing 30 Year Fixed Rate loan

During the 1970’s as interest rates took off along with inflation, so did the cost of the monthly loan payment. Rates peaked in 1981 and began to decline. As they did, payment came back in line over time to the previous historic lows in 2002. As you can see from the graph, today we are at new all-time lows. The cost of homeownership is far below the historical average and lower than 1963.

The real question is…is this a good time to buy a home for you? Buying a home is a personal decision and there are many factors to consider. So it’s impossible to say that it is the perfect time for you. Here are a few questions to ask yourself:

Will buying a home hinder your lifestyle?
Although 70% of Americans still view homeownership as being part of their American Dream, owning a home isn’t for everyone. If you happen to move often, it probably isn’t for you. If you don’t like responsibility, it probably isn’t for you. It is a lifestyle decision.

How is your credit?
Lenders will look to your credit score as part of the qualifying process for a mortgage. They will use your score to determine the answer to two questions: 1) do you qualify?; and 2) at what rate? Guidelines have tightened and the bar for minimum credit score requirements have been raised. Find how where you stand with your credit.

Have you saved for a down payment?
Aside from a VA or USDA loan, long gone are the days of 100% financing. Today you must have a minimum down payment of 3.5% for FHA loans (government insured) or 5%, or maybe even 10% for conventional loans (non-government insured) depending upon your qualification. If you have saved, or can obtain some help from relatives in the form of a gift, this may be a great time for you to buy.

Have you saved for closing costs?
This step is one that is often over looked. It is important that you understand all the costs associated with buying the home – from the lender fees, title company and attorney fees, to appraisal and other third party fees. In addition, be sure to inquire about any Home Owner Association related expenses. Depending upon your loan you may request that the seller pay a certain percentage of the closing costs on your behalf. The percentage allowed is determined by the type of loan.

Do you have a housing budget?
Whoops! Don’t forget this part. Make sure you have budgeted for the mortgage payment, which includes principal, interest, taxes, (homeowners) hazard insurance, mortgage insurance and homeowner association (HOA) dues. While the lender will determine how much house you qualify for, they are not responsible for your ability to budget. You should have a monthly amount in mind – one that you are comfortable with. Make sure you don’t strap yourself and end up house poor – a nice house with no furniture and no life!

For many buyers, the familiar phrase “get in while the gettin’s good” may hold true! If you have the American dream of homeownership, have saved for a down payment and closing costs, have decent credit, and can manage the responsibility…this is probably the perfect time for you to buy a home.