Q: We are being relocated from Ohio to Arizona for work. This is a corporate relocation.
Because Phoenix/Scottsdale cost of living is higher than Ohio, the company gives us a 3-2-1 mortgage buy down. I’m told they will subsidize 3 percent of the interest the first year, 2 percent the second year and 1 percent the third year.
This is an unbelievable opportunity but my husband fears that housing prices will go down more in the Scottsdale area so he feels we should wait. I would like to hear what you have to say.
A: First, a 3-2-1 mortgage buy down generally means that you’ll pay 2 percent instead of 5 percent interest the first year, 3 percent interest the second year, and 4 percent interest the third year. In the fourth year, the interest rate reverts to the original locked-in rate.
Any way you slice it, a 3-2-1 mortgage buydown is a nice incentive.
I don’t think prices in Scottsdale will fall much further than they already have – maybe another 10 percent. While another wave of foreclosures could push prices down further, home prices are already down 50 to 60 percent in parts of Arizona. Scottsdale/Phoenix has been hit hard. And at the lower levels, there are random bidding wars starting for some properties.
Meanwhile, if you buy now, you may qualify for a $6,500 tax credit plus the relocation benefits his company is offering, you will lessen the chance that you’ll be hurt financially.
But it all comes down to how long you plan to stay in the house and how much it will cost you to move. If you can take a better job, and know you’ll be there for 5 to 10 years, you’ll be fine. If you think you’ll move and then move again in two years, I’d rent rather than buy your next property.
You can’t time the real estate market just as you can’t time the stock market – and you shouldn’t even try.
If you buy something to live in, and make as smart a choice as you can, you should be fine over the long run. Just don’t expect a huge profit pop when you sell.
Remember, you need to research the specific location in which you plan to buy a home. Some areas have been hurt in this real estate market more than others. You need to pick the best community for your family.
In doing your research, you should try to determine the number of homes available your community or neighborhood of choice, the quality of the schools, the number of properties that have been foreclosed on and the overall stability of the real estate market in that community.
Use our mortgage buydown calculator to determine how much you will be saving and spending on your mortgage.