Tuesday, January 12, 2016

For Buyers Timing is EVERYTHING

As an industry professional you already know that the slightest change in an interest rate can make a big difference to home seekers. As an example, a 30 year fixed rate mortgage of $150,000 at a 4% rate would equate to a monthly payment of $1,028.62 (P&I only) but the same loan at 5% would amount to $1,117.73 a month. That’s a difference of $89.11 a month for 30 years! The new homeowner would end up paying an additional $32,079.60 over the life of the loan and just imagine how much that would be if it were in an interest bearing account for the same period of time.
This is the reason that home buyers are always so interested (or should be) in obtaining the lowest rate when financing their new home. One of the problems that can occur to someone that is trying to qualify for a home loan is when interest rates are on the rise. It is possible to no longer qualify for your dream home for no more reason than an increase in interest rates. It can and does happen.

Let’s say for example that you have found the perfect home and the price is at the very top edge of what your income allows you to qualify for. That’s good news but if you do qualify for that $300,000 castle today you may no longer be qualified if interest rates increase by the time you make the decision to buy it. The difference in the monthly payment may be just enough for the home that you want to be suddenly out of your price range.

This is a great reason to “lock in” your rate as soon as possible when applying for a mortgage loan. It’s also a great reason to make a timely decision when you have finally found the home of your dreams. And interest rates are not the only reason to make your move when the time has come. Keep in mind that even in a slow market you are not the only person looking to buy a home. I have seen more than one interested party lose their dream home simply because they didn’t act quickly enough.

I’m not saying to rush into anything but if you have found the perfect home for you and your family and the price is reasonable, don’t wait until it is too late. Why would you risk losing what you really want? As the title of this blog states, timing is everything and many would be buyers have learned this lesson the hard way.

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