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Texas Hill Country Blog
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— EasyMoneyNeverWorks @ 4:13 pm
There are a lot of different thought processes in the current real estate market. Some Buyers think they should wait for interest rates to go lower. WARNING: the current interest rates are the lowest rates in over 40-years. They are not going to go lower. All industry information we are receiving from lenders and bankers indicates that interest rates will go up from the current 5% to 7% by the end of this year. When buyers are pre-qualified, the lender will typically say, ‘you are qualified to borrow up to $200,000’. The lender is really stating this, ‘with your income, debt and credit score, you are qualified to pay us back, $1,073.64 in principal and interest every month for 30-years’. It just so happens that with your down payment, you can borrow up to $200,000.If interest rates go up to 7% and your income, debt and credit score are still the same, the lender will then say, ‘you are now qualified to borrow $163,000’. The principal and interest payment for a $163,000 loan is $1,084.44. If your income hasn’t risen, your debt and your credit score hasn’t changed, you are still able to pay back nearly the same amount. Unfortunately with the higher rate, your borrowing power has lessened.This type of qualification happens to every buyer who waits to purchase after rates have gone up. If you qualify for a $120,000 loan today and nothing in your life changes other than interest rates go up, you will only be able to borrow $100,000 at the end of this year. Say you qualify now for a $300,000 loan, after the rates have risen to 7%; the amount you can borrow is reduced to $247,000.DANGER: If you wait to buy until the rates have changed, you will be buying less home (meaning a smaller sized or less expensive home) or you will need to come up with more money for the down payment, to buy the home you want. In real estate, timing is always the key. Buy when prices are down, which is now and buy when interest rates are down, which is now. Don’t miss the boat by waiting for a better deal, when school gets out, when the weather warms up, or some other time, the best time to buy is now. Sherman D. Durst
           
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