Call/Text Dan: (425) 350-7136 email me

June 25, 2013 –  Ok, so let’s talk real quickly about the giant pink elephant in the room – “Mortgage Interest Rates“. Yes, they have increased, and increased rapidly overnight since the middle of May.

But just because rates are increasing and your buying power may be decreasing (see chart below), it doesn’t mean you need to rush into buying a home.

The question or myth I want to address regarding home affordability is – “Is now the best time to buy”?

If you know a real estate agent and follow one on any one of the social networks out there, you’ve probably seen them post, “Now is an amazing time to buy” or “The market is SO hot right now”. Well, yes, it is a good time to buy. For some people.
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The Current State of the Housing Market – Appreciation

Let’s address a couple of things first – typically when rates go up, it’s a result of a high performing stock market and a strong/stable economy. As a result, home values increase. Well, today, home values are simply increasing due to a lack of inventory and an end to 3-4 years of declining housing market.  More importantly to consider, interest rates are increasing because the FED is going to stop purchasing mortgage backed securities, NOT because of a strong economy and hot stock market.

So my point with this information is to look at the real facts and the current state of our economy.  Rates are increasing and home values are increasing from artificial sources, not traditional sources that indicate economic strength and stability.

Home values most likely WILL NOT skyrocket (at the predicted 20-30%), and interest rates WILL NOT jump into the 5% and 6% range overnight, so please, for the sake of your financial future, do not rush into buying a home. The best advice that I can give you is to relax, plan and prepare for a smart financial decision.
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How To Maximizing Your Home Purchase Investment

For maximum financial success and performance out of your real estate investment, run your current situation through this financial checklist as you begin to prepare to purchase a home:

(1) Do you have a 4-month emergency fund? ($1000 plus 4 months rent or mortgage payment equivalent in savings)

(2) Low or no credit card debt

(3) A down payment of 5% or more (except with USDA or VA buyers)

(4) A credit score over 700 (you can have as low as a 640, but the higher your score, the lower your interest rate)

(5) Prepare to settle or pay all collections or judgments at the time of closing on your new home (do not pay off in advance, your scores will drop)

(6) Actively contribute to a ROTH IRA or 401k account

(7) If you are paying PMI, have a PMI removal strategy with your loan officer. If they cannot give you one, I’d re-evaluate if the right person is helping you manage your mortgage

(8) Complete a Debt-Free Financial Worksheet with Dan.  This short form along with a consultation with me will help to change how you look at money, and encourage you to get every cent that you earn working for you.
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Short Video Interview –
The Current State of Rates & Real Estate Explained

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How Interest Rates Affect Purchasing Power

For those of you that have met the above criteria, or are working on a financial plan to prepare to purchase, this information below may help you better evaluate if now is a good time to purchase.


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Another way to look at how interest rates affect purchase power is:
(*based on 20% down payment)

Interest Rate:  3.75%
Desired total monthly payment:  $1850/month
How much home can you afford? $335,000

Interest Rate:  4.75%
Desired total monthly payment:  $1850/month
How much home can you afford? $298,000

Interest Rate:  5.75%
Desired total monthly payment:  $1850/month
How much home can you afford? $265,000

If you thinking about beginning the home buying process, I encourage you to read through my Mortgage Concierge Packet or visit my Know Before You Owe mortgage application guide.

As always, I love helping my readers, so please do not hesitate to message me at dan@thedankellergroup.com or contact me directly at (425) 350-7136.  If you found this information valuable, would you please give it a “LIKE” down below or feel free to share it as well with your friends!

***The loan interest rates, fees and terms presented here are for illustrating purposes only and may not be currently available. This information was prepared to assist real estate professionals and home buyers in illustrating some of the financial options available.