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The Home Buyer's Dilemma: Save or Buy Now?
Bryon Jones
By Bryon Jones, Senior Vice President, Strategic Accounts
United Guaranty Corporation
Posted on May 15, 2015

Is it better to save up to purchase a home or should you buy right now?

Assuming the borrowers have strong credit and are good candidates for a loan with mortgage insurance (MI), it may be better to buy sooner rather than later.

Some buyers will want to save up the 20% down payment banks typically require without MI, but doing so carries hidden costs that should be considered, including:

  • Today's historically low mortgage interest rates will inevitably rise—and those higher costs will be compounded over the 30-year life of a typical mortgage.
  • The median sale price of existing homes was $212,000 in March, translating into a 20% down payment of more than $42,400.
  • RealtyTrac estimates first-time buyers have to save for 12.5 years to accumulate enough to pay 20% down.
  • Waiting even a relatively short time may price the borrowers out of their desired home or neighborhood—due to rising home values.

United Guaranty's website has a detailed comparison of the costs of buying versus continuing to rent. Over a five-year period, purchasing usually delivers significant savings due to:

  • Appreciation (increasing value) of the home.
  • Tax savings.
  • Increasing equity.

You can see all the details in the Resources for Home Buyers section of ugcorp.com. It's a great resource for friends and family members with questions about a home purchase.

Bryon Jones

Bryon Jones is Senior Vice President, Strategic Accounts. Jones joined United Guaranty in 1998. He started in the Structured Products Department, and he has served in many roles of increasing responsibility at United Guaranty, including Capital Markets, GSE Relations, and Sales. He received his B.S. in math from Western Washington University. He is a Fellow of the Casualty Actuarial Society (FCAS) and a Member of the American Academy of Actuaries (MAAA).

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