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Major
change coming June 3 for new FHA loans.
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You are probably aware that
interest rates have been staying near all-time lows. Most
of our clients who have closed on homes recently are
enjoying rates below 4.0% on 30-year fixed rate
mortgages. (Keep in mind that rates fluctuate, and will
vary among different loan programs and different
borrowers.)
In general however, rates remain extremely low. Also,
sellers have had to drop prices to be competitive, so
there are many great deals to be found. Low interest
rates plus low home prices make the current market ideal
for buyers; perhaps the best it's ever been! Like
anything though, these interest rates will not last
forever.
Should interest rates begin to rise, it's equivalent to
the price of the house going up considerably. Let's pick
a house priced at $150K, and an interest rate of 3.25%,
to use as an example. For comparison purposes, the note
used is the Principal and Interest (P&I) portion
only; this does not include any monthly escrows or
mortgage insurance.
| Sales price |
Interest Rate |
Monthly note |
|
Sales price |
Interest Rate |
Monthly note |
| $150,000 |
3.25% |
$652.81 |
|
|
|
| $150,000 |
3.75% |
$694.67 |
$160,000 |
3.25% |
$696.33 |
| $150,000 |
4.25% |
$737.91 |
$170,000 |
3.25% |
$739.85 |
The left side of the table shows the note you would pay
at 3.25%, and also if it were 1/2% or 1.0% higher.
At right, you can see that each of those increases gives
you about the same note as if the house cost $10,000.00
or $20,000.00 more, and the rate was still 3.25%.
So,
based on the note you will pay, the short version is that
every half percentage rise in interest rate roughly
translates to a sales price more than 6.5% higher!
If you are hoping to buy a home, and waiting for prices
to fall further, keep in mind the above table. If a
seller reduces the price of a $160K house to $150K, BUT
the interest rates go up 1/2% during that same time, the
resulting note will be almost exactly the same, and your
wait will have been for nothing.
Buying a house involves carefully considering many
factors, and this is just one of them. Right now, the
market is superb for buyers. Let us help you take full
advantage of that market and the great opportunities it
currently offers.
Greg and Danielle
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All images and
content Copyright © 2013 Greg and Danielle Bunch. All
rights reserved.
No images or content may be copied, reproduced, printed,
distributed, or published, electronically or physically,
in whole or in part, without prior written permission.
Keller Williams Realty 1-888-351-5111, LLC
117 Belle Terre Blvd. Laplace, LA 70068 USA
Each Office Independently Owned and Operated
Licensed
by the Louisiana Real Estate Commission
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