This is an excerpt from the weekly newsletter from lender Dean Rathbun. I love his weekly emails because they share great information but are short and direct. This week I especially liked his notes on interest rates and what impact that has to your buying power.
Interest Rates Up or Down? Impact to Your Buying Power
One of the push backs I am currently hearing from buyers is that they fear values may go down. I thought I would do a quick chart that incorporates a decline in price and an increase in rates.
|Sales Price||$500,000||Sales Price||$450,000|
|Loan Amount||$400,000||Loan Amount||$360,000|
|Payments at 4%||Payments at 4.5%|
|Total Payment||$2,514||Total Payment||$2,377|
|Total difference is only $137 Per Month. Rates go up!|
Which do you think will occur first? A 10% decrease in prices or a .5% increase in interest rates? Conversely if the prices stay the same and the $500,000 home has a rate at 4.5%, the increase to the monthly payment will be $117 per month. Should a buyer continue to sit on the sidelines?
Fannie Mae High Balance Limits Lowered
Great news today as FNMA has increased the High Balance limits which now go to 95% loan to value. Only 5% down versus the 10% down that was required before.
Appraisal Scary Stories!
I have the story of all stories. There was a new purchase transaction in Palm Desert, CA with a sales price of $405,000. The appraisal management company called me today as the appraisal had come in low… wait for it… $41.00 low. Yes, the appraiser brought the appraisal in $41.00 low.
Why do I bring this up? It shows you how scared and silly the industry has become in these times of over regulation. You and I both know that the house isn’t worth less. The appraisers are very scared of large adjustments and in this particular case it didn’t affect the loan; hence his need to justify a lower price. Top that story if you can.
Thanks Dean for sharing your perspectives and stories. Interest rates are going up! If you want to maximize your buying power, now is a great time to buy. Here is Dean’s flyer on last week’s interest rates for Hawaii.