Got a guy in the mortgage business? (…now you do) but Guy Vetrano is a little more than just a “guy”, he’s a Certified Mortgage Planning Specialist at The Vetrano Group and is committed to your needs…at every turn.
Guy is one of our Partners in sponsoring classes and is a great person. We wanted to share some of his industry expertise with you today.
Everyone Wants a Lower Price, But What About the Impact of Interest Rates?
When shopping for a home, the natural tendency of any buyer is to want to pay the lowest price possible. It’s important to keep in mind, however, that the sales price is not the only factor that determines what the monthly payment will be. In fact, the impact of higher interest rates can easily nullify any benefit of waiting for a lower price.
Interest Rate Complacency
The problem is that many home buyers have been lulled into a sense of complacency because of extremely low interest rates. Since the Federal Reserve initiated its program of buying mortgage-backed securities, which control the rates people pay for their home loans, rates have been range bound, bouncing between 4.50% to 5.00% for a 30-year fixed-rate loan.
But, buyers shouldn’t be confused by this. These rates are artificially low! Historically, interest rates have been above 6.00%. And, any rate obtained below this number is a great deal, especially on homes with price tags from 2003!
Markets are Unforgiving
If your clients are waiting for prices to fall even lower, be aware that while holding out for a lower price may help them win the battle, they could lose the war in terms of monthly payments and overall affordability. With the Federal Reserve scheduled to end its buying of mortgage-backed securities this year, rates only stand to go higher for those who wait. In fact, interest rates are already on the rise and could go higher from here.
Clock is Ticking on Free Money
If you have clients who are planning on purchasing their first home this year, be sure to let them know that they need to take possession before 12/01/2009 to be eligible for a tax credit of up to $8,000.
If you have questions about this update, give me a call. I can show you how waiting for the lowest price could really cost your clients more in the long run.
Guy R. Vetrano
Vetrano Group Mortgage Services Inc.
480-222-5560
guy@vetranogroup.com