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Friday, May 1, 2015

MORTGAGE INTEREST RATES… Where are they headed?

Guest Blogger: Today's post is written by Sacramento Mortgage Expert, Matt Gouge.  All of his contact info and more can be found at this website: www.mattthemortgageguy.com. Thank you Matt for providing this great info for potential buyers in our Sacramento Real Estate Market.

MORTGAGE INTEREST RATES… Where are they headed?
Today being the 2nd day of the Federal Open Market Committee meeting it seems only fitting that I write about interest rates and where we are headed. This afternoon is the point in their meeting where they announce their policy decision (typically whether to change the fed funds target rate)…
When the Fed met in prior months they used the word “patient” when referring to when they would begin a federal rate hike. This key word was missing in the March meeting which some may feel is an indicator that the rate hike is coming sooner rather than later. In laymans terms, rates are going to go up, it’s not an “if” but a “when”…

I have my opinion about what exactly is going to happen to interest rates in the future but my opinion is merely that, an opinion. I will get to my crystal ball forecast at the end of this article but first I would like to make a simple point that folks should be aware of…

What everyone should know…
Rates are constantly moving. By constant I mean that rates change on a daily basis. There are economic factors that influence rates that are being measured, monitored, analyzed daily. Those of us who follow what is going on in the markets and pay attention to data know that there are numerous reports that can have an impact on rates and the affects can be dramatic and far reaching if the numbers presented are different from expectation…

What can we do?
As a mortgage professional who advises clients on a daily basis and really aims to educate and assist clients in making informed decisions I come across this question often. “What do you suggest Matt?”
The reality is that it truly is a great time to buy. I say that with sincerity and with confidence for a couple of reasons. Today’s historically low interest rates and great, stable loan programs are making homeownership affordable and safe. I use the word safe because we all know someone who entered into an adjustable rate mortgage or interest only type of loan 8 years ago that exploded on them when they saw what was in the fine print. These loans don’t exist today. Most people who qualify for a mortgage are able to get a 30 year fixed rate under 4%. Most of us don’t realize how amazing that is. Forget the fact that the home you wanted is $40,000 more expensive than it was last year. From a financial standpoint the loan terms you enter into when you purchase your home are more important than the price. For example, a 1% increase in interest rate is going to increase your monthly payment by about $200/mo on a $300,000 loan.

So my advice is to make it happen. Find a payment that you are comfortable with, then ask a mortgage professional to translate that payment and your down payment funds into what price range you should target. Then settle into a home that you own. A home that will appreciate in value and a payment that will remain constant despite what the rents around you do. We all have to spend money on a monthly basis to have a roof over our heads, we might as well spend it on something we own.

Finally - getting to your rate predictions…
Ok, Based on what I know and how the wind is blowing today here are my short and long term interest rate predictions. Rates will remain low for another 6 months with a fed increase beginning in late 2015- early 2016. In the window of 18-24 months we will see a SLOW uptick in rates that will put us in the low 5’s for a 30 year fixed rate conventional loan in mid 2017.

As always I am more than happy to answer any mortgage related questions from future clients or real estate industry friends. I hope to hear from you soon, Please feel free to reach out anytime!

Connecting people and homes, one loan at a time…
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Thanks again Matt for your guest blog post.

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clear skies,
Doug Reynolds


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