Spring 2021 New Financing
& Housing Market Environments
The costs (Interest Rates primarily) associated with financing a home are rising. This rise comes as a result of many things ... improving economic factors, increased Consumer Confidence, increased availability of COVID vaccinations, being the most notable.
As we pass the anniversary of one full year of battling COVID concerns, we're seeing a return to "Pre-Pandemic" interest rates. That being rates in the low 3's for 30 years fixed-rate loans ... for "good credit" borrowers utilizing a 20% downpayment to purchase a home.
But still, it's true that mortgage rates have inched up some. And even though interest rates still remain at incredibly low levels, borrowers are currently showing some hesitancy and concern about them right now. Refinance rates typically can and do run a bit higher than purchase transaction interest rates. This is laid-out per Investor and Agency guidelines.
The low inventory has resulted in a large number of the present transactions receiving multiple offers. "Highest-and-best" offers are often winning the day.
In the rising interest environment we're currently experiencing, every $1K saved in Purchase Price ... while remaining important ... becomes less crucial.
Here's an example of that being true:
A mortgage of $250,000 at 3% interest rate:
Principal & Interest = $1054.01/month
This is what occurs to that Principal & Interest payment if the interest rate rises:
- A mortgage of $250,000 @ 3.25% interest rate:
Principal & Interest = $1,088.01/month
- A mortgage of $250,000 @ 3.5% interest rate:
A buyer/borrower must then contemplate:
The increase in Principal and Interest
VS
the increased costs and expenses (should they decide to wait for the perfect home ... or become involved in a multiple-bid scenario on a home purchase).
In these scenarios, buyer/borrowers must also then ask and answer the following questions:
- Which serves my overall financial goals better?
- Which scenario ultimately costs me more?
Let me make this point crystal clear. I am not advocating any buyer pay over their comfort level for any home.
What I AM advocating is running the numbers and doing the math with your mortgage lender. The true costs are then revealed for all scenarios ... both in the short term and long term.
The same comparisons and math must be run by borrowers seeking to save a 20% downpayment:
- Does a higher downpayment better serve your overall financial interests?
Or ...
Again, I strongly recommend discussing this and running the numbers with your mortgage lender. The more advantageous financial path will be revealed by the math conducted.
Even with so much information available, either via real estate and lending professionals or the internet, commonly-held mortgage and credit myths still can muddy the waters and confuse borrowers. And too often they do.
They derail borrowers and keep them from realizing their home buying and financial goals. (Or at minimum, reaching those goals as quickly as they could have if they had chosen another path.)
It's just a fact. There are lots of moving parts within today's modern home buying and borrowing processes. Many pieces to the puzzle.
There's lots to know, lots to do, lots to consider, lots to make decisions on.
But buyers and borrowers cannot let that become a distraction for them when trying to reach their goals.
So, what is the best way to confront and stay on top of the challenges?
- Stay in touch with your lender
- Keep asking questions
- Learn the facts as they pertain to your specific financial scenario becomes increasingly important in this changing environment
- Focus and don't get distracted
How do you do that? Below you'll find some benchmarks that will help should you find yourself in the multiple offer scenario described above.
Keep in mind, currently:
- Every $10,000 extra borrowed above your "preferred loan amount", will cost about $45.00 more in Monthly Mortgage payment
- If during the time you waited to find the perfect home and/ or save that extra $5,000 - $10,000 the offer Price, and Interest Rates went up 1/4%, that payment for the same loan amount went up about $35 a month
Just remember, the bottom line is this: Should you hope to buy, now is not the time to be unprepared as you enter the market. Arm yourself fully. Obtain the best available data, be prepared to be quick on your feet, and be fully-equipped to make sound decisions for yourself.
Your goal is best accomplished by choosing an experienced mortgage lender to work with, remaining in contact with them, and communicating well throughout your entire process ...
Are you hoping to Buy, Refinance or purchase an Investment Property in New Lenox, Will County, or elsewhere in the Chicagoland area?
Contact me! I'll put my 40+ years of Mortgage experience and expertise hard to work on your behalf.
I'm easily found at:
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