One additional factor to add; The government is now offering First-Time Home Buyer’s an $8,000 tax credit for purchasing a home that closes before 12/1/09!  To learn more about this credit, please read Have You Heard?

Q: With all the headlines about the housing market, shouldn’t I just wait “it out”? I’m sure to get a deal, when everything settles!

A: There are more factors to consider then just the list price.

I colleague of mine sent me this article (linked below) which I found quite interesting. The artical explains (second to last paragraph) how waiting for a lower price won’t equate to paying less.

Time Magazine
After reading the article, I did some additional research…

Property interested in purchasing, with 20% down payment…

Purchased Now…

• Price = $218,900
• Interest = 5.5%, @ 30 year fixed rate.
• Monthly Payment = $994.31
• Total Interest = $182,834.15, paid on the duration of the loan.

Purchased in 12 months…

• Price = $197,010, if the price was reduced 10%.
• Interest = 6.5%, @ 30 year fixed rate.
• Monthly Payment = $996.19
• Total Interest = $201,022.11, paid on the duration of the loan.

In either case, you are not saving anywhere near the $21,890 (or 10%) as one might think. If you take into consideration the additional payments for 30 years and the total interest paid on the loan, you really are only saving $3,025.24

Math to back me up…
ADDITIONAL MONEY YOU WOULD PAY BY WAITING A YEAR.

Difference in payment, paid over loan term…
$994.31 – $996.19 = $1.88 x 360 = $676.80

Difference in interest, paid over loan term…
$182,834.15 – $201,022.11 = $18,187.96

Now take both of the above totals and add them together ($676.80 + $18,187.96 = $18,864.76) then subtract this new total form the 10% you thought you saved ($21,890 – $18,864.76 = $3,025.24)

Oh, and don’t forget to subtract the money you shelled out for rent while you waited, plus the loss of the GREAT tax benefits!

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