BE PREPARED – Ready & Armed for any curve balls in today's market
Mortgage Interest Rates have been on the rise. People need to be aware of this, especially if you are shopping for a mortgage and you are already tight on your mortgage payment. When your loan officer pre-qualifies you, they should always show you a comparison with rates about 1/4% higher than today's market. Just that 1/4% in rate could make a difference in regards to your housing budget or just for the fact that you might not qualify now.
Overall, I think too many of us, even loan officers, have been to complacent with the rates because they have been so low for the last several years now. This post is not to cause panic or instill fear, but to make you aware of possible changes down the road. I wrote about interests possibly moving higher a few months ago. Mortgage Interest Rates - Things you need to know. Since I have written this, rates have literally gone up about 1/4%. I will give details in the differences below.
Article about rates being the highest in the last 8 months. 30 yr fixed rate hits 8 month high - Keep in mind, they talk about so many new jobs, but more jobs were lost than gained. The news can be very misleading when it says it has added 162,000 new jobs. But again, they don't talk about what jobs were lost in this time period. Just more reason to why rates will rise and not just based on less jobless claims. As mentioned, there are many different factors that move rates up or down.
Some important input :
I have heard some real estate agents and loan officers state that you should wait because housing prices will drop some. So many fail to think through this statement, because if rates went up, would this really matter? In my opinion, so many are stuck on the fact that you don't want to be upside down on your house. You should be buying your home as a long term investment. Especially if you have kids in a good school system, chances are you would be in that house for 10 + years. Now, you could be relocated because of your job or because of a few other things. Hence why you really need to plan when buying a new home and just say that you will worry about other obstacles when they happen. But in my opinion, who cares if you are upside down early on, if you love the neighborhood and the school system. I truly believe that values will increase some down the road. But keep in mind, you will be paying down your mortgage at the same time.
2 Examples of Rate Increases for the WORST
Example # 1 - Just showing what a higher rate will do to your mortgage payment. The example below is based on a $250,000 mortgage amount.
After doing mortgages for 17 + years now, I know that even a $50 increase can make a huge difference. Some of us would then say that borrower shouldn't be buying a home then. But is that a fair assumption? Everyone has some sort of cut off point. When I qualify a borrower, one of my first questions is to ask them how much of a mortgage payment that they are comfortable with, not to exceed. You know how many borrowers are asked what kind of purchase price that they would like? More that are focused on price and not payment. I really try to get people to understand that they should not focus on the interest rate, and focus more on the payment. Just food for thought.
Example # 2 - Showing you that waiting for prices to come down might not make a difference.
Here is a good example showing you that you are paying off more principal with a lower rate even though your mortgage amount is more. In 10 years, instead of it being a $25,000 gap, it is now a $17,115 gap in regards to what you owe on the higher mortgage amount.
Summary : Please stop listening to people that suggest you wait for the values to drop even more. I don't have a crystal ball, but I would speculate that rates will continue to climb throughout the summer, unless the government or someone else comes back into the market and starts to buy up the MBS's. (Mortgage Back Securities) Yes, there are many variables that weren't mentioned that can affect interest rates. But the mortgage interest rates have been low for too long and this will hurt us in the long run.
Food for thought - If you are very serious in purchasing a new home, feel very comfortable with a specific monthly mortgage payment, and feel secure in a few other areas of your life.... then buy now, don't wait.
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For more information on FHA loans, please go to this link. The FHA Expert
For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!
Important Information about the First Time Homebuyers Tax Credit
Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc
If you are currently in the market for your first home, you may be curious as to how a Real Estate Agent can help you. You are about to be making an important decision for your future, a great investment of both money and time. I have a wealth of experience helping first time buyers like you make sound, informed decisions. 
