When's the right time to purchase your first home?
President-elect Donald Trump has yet to officially begin his term in office, but the housing market may already be seeing some effects.
Mortgage rates have gone up from 3.34 percent in October to 4.02 percent in November. While the jump may appear minimal, according to CBS News business analyst Jill Schlesinger, this change is “pretty dramatic.”
“And the reason that rates have jumped is the market believes that under President-elect Trump’s policies, where you get more some more spending, some tax cuts, we’ll see more growth, and so the Federal Reserve will have to raise rates faster and all interest rates will likely rise as a result,” Schlesinger explained on “CBS This Morning.”
Still, a mortgage rate of just over four percent still sounds relatively attractive. Does this mean you should buy your first home now? “Hang on a second,” Schlesinger said.
First-time home buyers made up 35 percent of all home sales in 2016. That number is expected to jump to 52 percent next year. But for those who are thinking about making the leap to home ownership, Schlesinger said it all depends on your “personal financial situation.”
So how do you know if you can afford your first home? According to financial planners, you should be spending from 25 to 30 percent of your gross salary on housing, a calculation which also applies to renting. You’ll also need money to pay a down payment of 20 percent of the purchase price, and don’t forget to factor in other expenses like taxes, insurance and maintenance costs.
The average age of new homeowners is in the low 30s, and more millennials are choosing to keep living at home because of the costs.
“If you want to buy a house, be clear,” Schlesinger said. “Run your numbers, rent verses buy. If you can stay in your parents’ and they’re really letting you do that, rock on. Keep saving.”