After looking at several Hollister homes I heard the frustrated buyer sigh: “I think we’re just going to wait to buy a home“. I tried to reason with him regarding rising prices and the likely increase in home loan rates. He was just too disappointed to hear anything right then. So, this post is my therapy for today’s weary home buyers.
Home loan rates WILL go up. It’s only a matter of when will they start. All of the attempts to stave off a sick economy cost money and will begin to push rates higher. As they rise, ‘purchasing power’ drops:
Let’s say my buyer waits 6 months and the rates then are up .5%. His $300,000 loan will cost $92 MORE each month than he could get today. To qualify then he will have to earn $225 MORE per month for the same loan he could get now. If his income hasn’t changed his purchasing power will drop by $17,150!
If the rates go up by 1.0% the payment will jump up by $192 per month for the same $300,000 loan he could have gotten today. $192 PER MONTH! Yikes! His income will need to be $460 more per month to qualify for the same loan he could have gotten today. With no change in income, his purchasing power will drop by $32,800!
Postponing the purchase of your home doesn’t make cents. Get a good night’s sleep and go back at it tomorrow. Afterall, somebody is buying these homes. Why not you?