Waiting to Buy a Home? Consider the Hidden Cost

When it comes to major purchases, it’s tempting to try to time the market perfectly. Sometimes that’s easy, like waiting until Black Friday to buy a TV, or stocking up on Christmas decorations in January. But what about buying a house?

Homeownership matters to most consumers, with 92% considering it as an important goal, and 70% rating it as a safe investment.* But many potential homebuyers stay on the sidelines because they’re waiting for market conditions to change, citing affordability as their primary concern.* And in today’s unpredictable economy, it’s understandable that buyers hesitate to make such a major purchase.

Unfortunately, the housing market is notoriously difficult to time. Waiting for mortgage rates to drop can also mean watching home prices rise, and the goal of a lower monthly payment can cloud the bigger financial picture.

Consider these examples of principal and interest payments on a hypothetical 30-year fixed-rate mortgage. The first example illustrates buying a $400,000 home today with a higher interest rate, compared to the same home one year later after rates have dropped and home values have increased 5%.

The figures above do not represent actual terms being offered and are provided for illustrative purposes only. Please consult with your lender for an estimate specific to your scenario.

So, is that lower monthly payment a financial win? You save $143.10 a month on your payment, but you spend $20,000 more on the same house. It will take 11.6 years of payments to break even and start realizing those savings. The instinct to minimize your monthly cost makes sense, but ultimately, math shows it’s not the bargain it seems!

If you’re renting, a delay will cost you even more. You’ll pay another year’s rent while missing the opportunity to build equity. Essentially, your housing costs for that year will benefit someone else, instead of building wealth for you.

Bottom line? Don’t let perfect be the enemy of good. Our long-term goals don’t suddenly materialize in the future. They happen step by step as we navigate an ever-changing and deeply imperfect world. If you’re ready to buy, take that step. And remember … we’re always here to help!

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*2023 Fannie Mae Mortgage Understanding Study

This information is not intended as financial advice. You should consult a financial advisor to devise a financial strategy that works best for your situation.

The following loan scenario is for illustrative purposes only: If a borrower with a 700 FICO score and 33% debt-to-income (DTI) ratio purchases a $420,000 home, provides a 4.76% down payment (loan amount $400,008), and obtains a 30-year fixed-rate mortgage with an interest rate of 7% (assumed APR of 7.33%*), the repayment terms would include a monthly principal and interest payment of $2,661. Does not include applicable taxes and insurance. The actual obligation will be greater. All loans are subject to credit and property approval. Certain restrictions may apply.

**Interest Rate/APR: The sample rates shown are neither an advertisement, an estimate, nor an offer to lend. The annual percentage rate (APR) is the cost of credit over the term of the loan expressed as an annual rate. The APR shown is based on the interest rate and fees equal to 3% of the loan amount. It does not take into account any other loan-specific finance charges or mortgage insurance you may be required to pay. Rates are for illustrative purposes only. Actual rates may vary.

†Principal & Interest: This is the monthly principal and interest payment based on the term, selected loan amount, and interest rate. Payments for taxes, insurance and MI/PMI are not included.

‡Monthly Savings: This is the difference between the two monthly principal and interest payments.