For those of you who are not frequent readers of the NWI Loan Guy blog (if you’re not, you should be), you know that we try to bring you non-biased advice on how to buy or sell a home, as well as helping you protect your financial health.
Lately, I have spoken with many would-be home buyers who are reluctant to move forward on a purchase. Besides credit issues (which disqualify about 30%), most state that they are simply worried about the economy and the direction of home prices.
While I can certainly understand the concern, NOW is probably one of the best times in history to purchase a home if you qualify.
While some of those in the media are running around like Chicken Little claiming that the sky is falling, truth is that homes are on sale (a clearance sale at that) and interest rates are the lowest in recorded history.
Sad thing is that if you are waiting for rates to fall further, it may not happen. If you are trying to time the real estate market and buy at the low point, you won’t know what the low point WAS until the prices start to rise.
When a lender qualifies a buyer for a loan, they look at the debt-to-income ratio. To be very simplistic, it is your current income divided by your debts including the monthly payment on the home you are thinking of purchasing. A ratio in the low 40′s or below is best.
The reason for the long intro is this… When interest rates start to rise (I said “when”, not “if”), it will erode your purchasing power. In fact, for each 1% that rates increase, you will lose 10% of your purchasing power. The following is an example based on a $200, 000 initial loan at 4.5% interest with a P&I payment of $1.013 a month.
Loan Value $200,000 $190,000 $180,000
Rate @ 4.5% @ 5.0% @ 5.5%
P&I payment $1,013 $1,020 $1,022
Of course, this is just a comparison showing different rates and does not factor in taxes, insurance, mortgage insurance, closing costs, or other fees. What it is meant to do is show you that by waiting and hoping rates go down, you could find yourself able to qualify for less house.
I have to stress to you that housing is on sale and that there may never be a better time to buy than now! If you would like to speak with a top-notch Realtor, let me know. I work with some of the best in the business and would be happy to introduce you to one.
Thinking about a refinance but not sure if it is worth the costs? Let’s talk. If I could save you hundreds of dollars a month or help you pay off your home sooner (or both), is it worth spending 15 minutes with me?
Call me now and let’s set up a time to review your current (or future) loan and see if it makes sense to move forward. NO charge, NO commitment, and NO BS! Just simple advice you can trust to help you make an informed decision. Just call 219-695-0369 or email me at scott@nwiloanguy.com. If you are ready to move forward now, you can visit my website at www.NWILoanGuy.com and fill out an application.
Scott
Your Indiana mortgage expert specializing in FHA, VA, and USDA Rural Development loans.
[...] to be above that of a standard FHA loan. You can read my previous post, but understand that for every 1% that the rate increases, you will lose 10% of your buying power. For example, a particular monthly payment may buy you a $200,000 home at 5%, but only a $180,000 [...]