Tired of Low Mortgage Rates?

Although it's safe to assume that few people are actually "tired" of today's record-low mortgage rates, it does seem that many think they will remain low for the long haul. Or, perhaps drop even lower..? While this could happen, I've been in this business long enough to know that there is no crystal ball on interest rates. And election years tend to throw everything out-of-wack.

Although mortgage rates have edged up slightly over the past week- about .125% - they remain extremely low. With government support behind high balance conforming loans to $729,750, a good percentage of buyers in the Bay Area's expensive housing market still have access to the best 30-year loans in history. With a 20% down payment against a purchase price of $912,000, a qualified buyer with a credit score of 740 can expect a "no points" rate as low as 4.5% (APR 4.52%) with monthly payments of $3,697. Buyers considering purchase prices of $1,225,000 with 20% down can get a piggy-back second mortgage in order to secure the high-balance 30-year fixed product.

The weak economy and pending election has many would-be buyers on the fence and this atmosphere of "wait and see" engenders a buyer's market for those willing to commit. Although prices could dip further, those with the confidence to move forward now will purchase homes at already significantly reduced prices and secure long-term financing at today's historically low interest rates. If property prices were to dip 10% over the next year and mortgage rates increase to 6.0% (historically, still at the low end of long-term rates) today's buyer would have the comfort of lower mortgage payments. Taking 10% off the above-listed purchase price of $912,000 and setting the adjusted mortgage against a rate of 6.0%, mortgage payments would be $3,937, an increase of $240. Obviously, I don't mean to suggest a benefit to paying a higher price for a home. On the other hand, if prices remain fairly stable as interest rates increase (which they eventually will), today's buyer would realize a clear gain.

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