Is it too late? Only if you were waiting for the lowest mortgage rate ever!

I have to remind myself as I lock my friends and clients into a committed rate for their pending home purchase or refinance today that an interest rate in the upper 4% range on a 30-yr fixed is still a historically low interest rate other than the very small window of time over the past few months we were lucky to witness. It is tough as a professional and trusted advisor to meet with my new clients and friends and discuss the actual rate the day they came in last month, compared to the rate they may end up with if they were still searching for that perfect home, waiting for their overpriced home to sell or simply, MSNBC told them that mortgage rates would plummet into the 3% range for the first time EVER!

Unfortunately that day has come and gone and I have a lot of disappointed clients that burned that 4.0% number into their heads. The budgeting and planning of that 3.75% 30-yr fixed rate they heard about on 20/20 or some random advertisement on the radio or internet that never happened, now what?

Fortunately, so many of my clients were able to take action back in early 2009 when we saw rates dip into the 4% range for the first time in our generation and it seemed dropping their interest rate from 4.75% to 3.875% became more of a bragging right, not the appreciation of how low their borrowed funds really were historically.

I have attached a few graphs and comparisons of what the indecision or sitting on the fence may have caused. I compared a few scenarios of a $325,000 purchase or refinance value where the loan at 80% of the value was at $260,000.

Had the new home purchase or refinance allowed a rate lock on Nov 4th at the "peak" at 3.875% on a 30-yr Fixed, with perfect circumstances and an APR around 4.126%, it is a much different picture and analysis than 40 days later on Dec 13th with rate a whopping 1% higher at 4.875%. Actually, a difference in monthly payment of $153 a month for the same exact home/purchase price with a 1% rise in rates over the past 40 days.

Another surprising fact when I ran the numbers considering my clients that were waiting for home prices to drop more, had they locked on their new home on Nov 4th on a home price of $325,000, if they waited 40 days until today to lock, they would have dropped their purchase power to a price of $289,000 to have the same monthly payment.

The first reaction for most is, how did rates climb 1% in a little over a month? The more logical reaction or thought would be, how did rates ever plummet to 3.875% without a total global economic collapse.

Thankfully, no global or US economic collapse YET, and the reality is you still have plenty of bragging rights at the water cooler if you lock in your interest rate at 4.875% versus 3.875%. Obviously the status of having a 30-yr mortgage rate under 4% is held by very few in my database and fun to brag about at Christmas dinner this year with your family, but please know, no one is going to mock you if they know you held out and ended up with the forbidden 4.875%.

If you need a shoulder to cry on or a rebuttal for your annoying brother-in-law that is going to be bragging up his 3.875%, give me a call or shoot me an email and I can give you some compensating arguments as to why there had been that slim chance rates could have moved lower. That way you can look like the cool risk taker playing the market and that is simply "how you roll" rather than you truly did miss the prefect window.