Mortgage – Unless you’re buying in cash, cheaper home don’t always mean more affordable
By Mike Miles
If you’ve looked into buying a home lately, you already know. Buyers are stressed.
With home values high, inventory low, and competition fierce, I have heard more and more buyers say they are going to “wait until home prices come down.” It’s an understandable strategy.
But the problem is, most people don’t understand that even if home prices come down, that doesn’t necessarily make the purchase more affordable. Let’s say that home prices drop by 10% – a pretty big drop – but interest rates go back to where they were about a year ago…how would that affect the monthly payment?
Let’s take a look:
$200,000 loan amount
2.75% rate on a 30-year fixed
= $816/month (without PMI, taxes, and insurance)
Now let’s drop the home price by 10% price and adjust the interest rate to January 2019 levels.
$180,000 loan amount
4.00% rate on a 30-year fixed
= $859/month (without PMI, taxes and insurance)
That cheaper home just got more expensive.
So. To wait or not to wait? Interest rates can be volatile. That can mean either risk or, sometimes, reward. But how much? Well, I’m glad you asked. Click here for an easy way to find out.
Want to run some scenarios? Give me or my team a call.
This weekly Sponsored Column is written by Mike Miles of Fountain Mortgage. Located in Prairie Village, Fountain Mortgage is dedicated to educating, and thus empowering, clients to make the best financial decision possible for their situation. Contact Fountain today.
Mike Miles NMLS ID: 265927; Fountain Mortgage NMLS: 1138268