The third thing to consider in your purchase of a Pasadena home are the mortgage rates. Rising or falling mortgage rates can affect your payments similar to rising or falling prices. Even if prices drop 5% more in Pasadena, rises in mortgage rates could make that cheaper house more expensive to pay for.
Since 2005 mortgage rates for 30-year fixed mortgages have fluctuated between a low of 5.48% on January 24 of 2008 and a high of 6.80% on July 20, 2006 according to the Freddie Mac Primary Mortgage Market Survey®. As of the writing of this post, interest rates have risen to 6.42% as of June 19, 2008 for loans under $419,000 up from 6.09% two weeks earlier for. So what effect does this have on your monthly payments? Well, the median home price in Pasadena this week is $673,879 according to Altos Research. So if you are borrowing 80% of that it's about $538,000 you're borrowing. Since this is above $419,000 you would check if your lender had different rates for this higher amount, but we'll use the conforming rates for our explanation. At 6.09% your payment would be $3256.78, but now that the rate is 6.42% your monthly payment would be $3372.27, an increase of $115.49. A significant difference to pay each month just because the interest rates changed!
For every half point increase in interest rates for a 30 year loan on a median Pasadena home, you add about $175 to your monthly payment. This $175 increase is the same effect that a $28,000 increase in price has on your payment. The point is that if you are waiting for another $20,000 drop in prices before you buy, but interest rates rise 0.5%, you'll end up paying more even with the lower sales price.
To check the current interest rates and find out how much you can qualify for check out our mortgage info page with the latest rates, updated weekly.
Now that you know about the effects of taste, your financial situation, and mortgage rates, we're ready to talk about PRICE next time...
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