Aug. 2, 2010

4% For a 30 Year Fixed Mortgage!?!

Yes, that's not a typo or missing some additional .5 or .75.   As mortgage backed securitities continue to gain steam due to overall weakness in the economy the rates for Conventional and Government loans have reached new lows.   For the first time in my time as a Loan Originator I had a client close on a 30 Year Fixed at 4% last Friday!   

All borrowers regardless of credit scores should be able to get into at least 4.25% with standard 1% origination fees right now and High Balance loans up to $567k should aim for 4.5%.   These rates/prices are still available as we start this week and unless we see some huge positive economic news come out (such as really positive numbers on Friday's Nonfarm Payrolls & Unemployment Report) they should remain for the first week of August.   If you're a home-owner and haven't refinanced in the last year or two you should at least be looking at the monthly savings vs. loan costs of doing a refinance with rates like these.   If you can make up the costs in a year or two and plan on being in the home longer than that then a refinance makes sense. 

For buyers contemplating a purchase but not quite sure whether to jump, here are some very important numbers for you take into consideration.  The chart below shows the decline in your purchasing power if you compare current interest rates vs. those you may encounter 6 months or a year down the road when they go up to historical 30 Year Fixed Averages.

Amount Borrowed  $  360,000  $ 349,600  $   339,600  $  330,000  $    320,800  $  312,000
Interest Rate 4.25% 4.5% 4.75% 5% 5.25% 5.5%
Term (Years) 30 30 30 30 30 30
Mortgage Payment  $       1,771  $      1,771  $        1,772  $       1,772  $        1,771  $       1,772
Property Taxes  $          400  $         400  $           400  $          400  $            400  $          400
Property Insurance  $             60  $           60  $              60  $             60  $              60  $            60
Total Monthly Pmt  $    2,231  $   2,231  $     2,232  $    2,232  $     2,231  $    2,232

If interest rates rose to 5.5% youd lose approximately $48,000 in purchasing power for the same monthly payment!

While we don't know how long it will be until interest rates start rising again, it's not a question of "if" but more of "when".  You combine these interest rates with the currently low prices available for most homes in King/Pierce/Snohomish counties and it makes for a fantastic time to be a buyer.  While loan programs aren't as flexible as they were several years ago and most borrowers will need to bring a down payment to purchase, this is almost a once-in-a-lifetime combination of mortgage rates/home prices. 

Michael Pollock is an Accredited Buyers Representative with EXP Realty and  Licensed Loan Originator with Northwest Home Center

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