What better time to purchase a new home than now? That is a question that we are asking our customers as we see the fantastic home values that are available right now along with the historically low interest rates. As people like Brian Buffini (who has the largest real estate training and coaching company in North America) says “this is one of the most affordable times to purchase a home in the last 40 years with the rare combination of low home prices and low interest rates at the same time”.
I will never forget when I was doing mortgage loans in the the 1980’s when home loan rates hit 17.50%. You can imagine how low today’s interest rates look to me today when they are in the mid 4.00% range, Wow!
To give you an example, I have attached a graph that shows how affordable homes are right now when combining price and interest rates together. As you can see, based on an 80% loan of the median sales priced home in King County in 2006 and the average 30 year fixed rate conventional loan, the principal and interest payment was $1,928.63. This compares to a principal and interest payment of $1,456.44 based on the averages in 2010. This is a staggering difference of $472.19 per month.
Here are some other factors to consider:
1. At some point home values are going to go up and we don’t usually know when the bottom of the market was until it is several months later.
2. At some point interest rates are going to go up and we don’t know when that is going to be? Interest rates go up much faster than they go down. Two years ago I saw rates go up .75% in two days and it took a very long time before they went back down to lower levels. The government has indicated that they can’t continue to hold down interest rates forever. Waiting for home prices to possibly decline further could lead to a substantially higher monthly payment as a result of a higher interest rate even if the sales price does go down some. .
3. The temporary high balance loan amounts for FHA and Conventional loans is set to expire on September 30th, 2011. We don’t know if this will get extended and if it is extended we have heard rumors that the maximum loan amounts may be reduced? Right now, in King County the maximum loan amount for an FHA loan with only a 3.5% down payment or a Conventional loan with a 10% down payment is $567,500. If this doesn‘t get extended then the Conventional and FHA loan limit could be as low as $417,000. That means that the only way to borrow more than $417,000 would be with a Non-Conforming “Jumbo” loan that would require a minimum down payment of 20% and probably have a higher interest rate as well. Many of the old first and second mortgage combination loans will only go to 80% to 85% now days.
As you can see, prospective home buyers have a wonderful “window of opportunity” when purchasing a home today. We are helping create wonderful success stories out there in assisting happy customers get into that great new home and “seize the opportunity” of buying that neat new home. Please let me know how I can assist you and your clients to take advantage of this opportunity for them to own that first home or the next home for them or if they should have any questions regarding home mortgages and how easy home buying can be today? Thank You.
“Loans with Honesty, Integrity and Trust”
| David L. Miller
Home Mortgage Consultant
Leaders Club Member
Wells Fargo Home Mortgage
10900 N.E. 8th Street #1430
Bellevue, WA 98004
800.643.0528 x 8680 Toll Free