What you sow now, you will reap later!

I am currently working with a prospective buyer to purchase a single family home, and he was shocked at how prices have gone up recently. I explained to him that prices really haven't gone up, they have just leveled out to where they should be while our market has adjusted accordingly. His next statement is what prompted me to write this blog. He said "I'm just going to renew my lease for one more year and try to purchase again next year."

Sounding like a tenacious salesperson, I said "BAD MOVE! Just get a rope, and hang yourself!" Without actual numbers to back me up, I said "Climbing interest rates, and housing prices will skyrocket your monthly payment obligation by this time next year... affording you something less than you can purchase now. And, that's just the beginning! Your accountant, will build you gallows, and your financial advisor will lay the noose over your head."

Now I had to crunch some numbers to help my client avoid the lynching. In doing so, I used my clients maximum purchase price of $285,000, with him securing a conventional loan in the amount of $270,750, and putting 5% down for the study.

First I mentioned interest rates climbing. In Freddie Mac's December 2015 Economic and Housing Market Outlook, the current 1st Quarter interest rate is 4.1%, and the projected interest rate for the 1st Quarter of 2017 is 4.8%. Currently, if my client purchased a home today his principle and interest payment on a 30 year mortgage would be, $1,308 per month with an interest rate of 4.1%.

And for the projected housing prices, I sought out CoreLogic to help me. CoreLogic is the leading provider of financial, property and consumer information, analytics and business intelligence. In their November 2015, US Home Price Insights Report their forecasted year over year percentage change in Nevada is 5.4%. Translated, this means a home priced now at $285,000 is forecasted to be valued at $300,390 by the 1st month of 2017.

Now let's calculate the payment for the forecasted value of $300,390. The projected principle and interest payment on a 30 year mortgage would be, $1,576 per month with a projected interest rate of 4.8%. A difference of $268 per month, or $3,216 for the year.

The subtotal my client will reap for sowing now is a whopping $18,606. I say subtotal, as the sum total can’t be tallied without his accountant, or financial advisor.

With just this discovery, and a little fear of the gallows, my client has decided to reap financial blessings, by sowing financially now!