Now that the frenzy of the recent tax credits has passed, you might be sitting around wondering how you can possibly afford to buy a home without help from Uncle Sam. In fact, as a buyer you are now living in what many economists feel is the best possible time to buy a home-without government help!

There have been two important changes that have occurred since the tax credit expired: first, mortgage rates have dropped, and secondly, sellers are willing to be creative.  

Mortgage rates have dropped almost half a point on a conventional 30 year loan. A half a percent may not seem like much, but it can have a huge impact on your ability to buy a home. How? 

The average rate on a 30-year conventional loan was 5.375% during March. Using an example of $300,000, the monthly principal & interest would be $1,679.91. However, that same $300,000, 30 year conventional loan at today’s rate of 4.875% would cost you $1,587.62. That’s a monthly savings of almost $93 per month, and an annual savings of almost $1,108-which will save you $33,224 over 30 years. That is a much bigger savings than an $8,000 tax credit. 

Sellers today are not just lowering their price, but are willing to be creative in order to get their house sold.  Let’s say you make an offer on a home-and instead of asking the seller to drop the price, you ask the seller to pay two points to help lower your mortgage rate even further-down to 4.375%.  

Using our $300,000 mortgage example, your monthly payment drops even further, down to $1,497.86, which is a savings of $182.05 versus the $1,679.91 you would have paid when the tax credits were in effect. That’s an annual savings of $2,184.60, and $65,538 over 30 years.

To put it into perspective, what does $182 a month represent? You can buy that much needed second car, or pay for FIOS cable, or pay off credit cards. Those are real dollars in your pocket every month, not just a one time tax credit of $8,000.