Yes, you can. Rates on 30-year mortgages fell recently to the lowest level on record after the Federal Reserve launched a new effort to stimulate the struggling U.S. housing market.
Mortgage finance giant Freddie Mac said Thursday that average rates on 30-year fixed-rate mortgages dropped to 4.85% last week, from 4.98% the previous week. This was the lowest in the history of Freddie Mac's survey, which dates back to 1971, and was down a full percentage point from a year ago. These are truly historic times and they present a great opportunity to anyone who is thinking of buying.
If you or someone you know is ready to take advantage of historic low prices and historically low interest rates, please call me or send me your referral. Don't let this opportunity pass you by.
Here are specific example of the effect home prices vs. interest rates can have on your wallet:
Example 1. Home prices fall 10% and interest rates go up to 6%. Choose A or B
A. Purchase a home for $400,000 today with 10%($40,000) down and finance $360,000 at 4.85% on a 30 year mortgage, your monthly Principal and Interest(P&I) would be approximately $1899.69/mo.
B. Let's say there is room on the downside for home values to fall another 10% and room on the upside for mortgage rates to climb to 6%, and you decide to wait. If the price drops in value by 10%, then your home price would be 360,000. Put 10%($36,000) down and finance $324,000 at 6% for 30 years and your P&I payment would be $1942.54/month.
Results. For this hypothetical scenario the smart answer is A. Even though you saved $40,000 on the purchase price(Yea!!), you wound up spending an extra $42.85 per month(Boo!!) and if you pay this over 30 years without selling or refinancing, then you cost yourself an additional $15,426 and ended up not looking so smart if you chose B.
Example 2. Home prices fall by 5% and interest rates go to 5.50%. Choose A or B
A. Purchase a home for $400,000 today with 10%($40,000) down and finance $360,000 at 4.85% on a 30 year mortgage, your monthly Principal and Interest(P&I) would be approximately $1899.69/mo.
B. Home price falls by 5% to $380,000, 10% or $38,000 down and finance 342,000 at 5.5% for 30 years. Approximate P&I is $1941.84
Results. Again, A is the smart choice. If you chose A over B then you would have saved $15,173.42 over the full 30 year mortgage term.
I know it sounds crazy to spend more for a house but pay less for a house. However, if you believe that there is room on the upside for mortgage rates, then you are smart to buy now and save money in the long run.
Your Realtor,
JJ Leininger
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