April 12, 2022

I hope you are having a great week so far, and yes, a tad chillier week at that!

I had a potential client decide yesterday that will save more money for a bigger down payment and buy next year. It took you 42 years to save 5% down, and now you will save 15% in the next year, beat inflation, combat higher interest rates, and miraculously prices will drop? So here is how that one works, and today we will use numbers to show why the above comment doesn't make sense!

Today they can qualify for $850,000.00 with 5% down, and their payment would be about $5775.00 per month with Property Taxes and Insurance at a 5% interest rate.

Let's say prices increase just 3% in the next year, and they save up another $42,500 (although they only make about $160K which is about 10K net a month).

Next year's price is $875,500.00 a year from now, and let's say interest rates are the same, then their new payment is $5431.00 per month. Big Win, they save $344 per month for 30 years.

Let's try it with 5% increase in value - Same rate - $5534.05 payment - Still winning! (Charlie Sheen wrote that last part.)

We are now approaching reality, so prices will likely be 8% higher 12 months from today, and let's go with rates being .250% higher, and our borrower found the extra 5% in the last year!

Price is now $918K / the new payment with the 10% down is now $5815.68, which is higher. They owe more on the house, and when the house is paid for, the taxes will be $71.00 more per month.

Imagine the buyer who did this last year and waited and saved 5% more! LOL!

So they were looking at the same house at $725K last year with a 3% rate and a payment of $3984.89. So they wait until this year and get to pay $5775 when they saved no more money or $5276.48 if they have the 10% down. Who is winning now?

We need to educate our buyers as we knew that rates last year would be going up at some point, although we didn't feel it would be so drastic. We knew about the inventory shortage. We know a lot, but the clients hear a bozo say the market will drop when the temperature hits 100 in the desert and listen to what they want to hear.

I have slowed down and taken more time for every client this year. It's a more challenging year for people to buy, and they need to know we care now more than ever before.

Interest rates got a little better today because inflation was a mere 8.5%! Yup, they thought the number was going to come in higher! Consumer Price Index Year over year 8.5 vs. 8.4 forecast, 7.9 previous month / monthly 1.2 vs 1.2 forecast - 0.8 previous / CORE year over year 6.5 vs 6.6 forecast, 6.4 previous / CORE monthly 0.3 vs 0.5 forecast , 0.6 previous- the Core number was great, and there was fear that the 8.5 number was going to be much higher! A win today for the interest rates! YAY! One in a row!!!
30-year Government Loans (FHA / VA) are in the low to mid 4's
Conventional Loans up to $647,200.00 - High 4's low 5's
High Balance Loans $647,201.00-$ 970,800.00 are in the high 4's to low 5's +
Jumbo loans above $970,801 are in the high 4's +. We can mid 5's with as little as 10% down. We can do 1-year findings on these too!
5/1, 7/1, 10/1 Arms are in the low to high 3's for over $647,201. Under that, don't bother right now!
Bank statement loans - They are available with 10% down again! 5's+ depending on down and credit score.
Stated income loans - I have one bank with 30% down, but everything else has to be perfect! Interest rates are in the high 4's.
0 down loans are in the 4's - 620 credit score min right now! Mid 3's for the most part up to $670,000.00 Price.
0 down Jumbo to $975,000.00 - 680 credit score - call for a quote
Private Money lenders - hard Money Loans - 35% down!
No Ratio Loans 30% down
Debt Service Coverage loans with as little as 25% down
Bridge Loans - are typically 5.49 - 6.49% with limited fees - But they get you where you need to go!
Interest rates are subject to change without notice! Above are LA County Loan Limits.

I will be around all week if you have any questions or if someone is interested in buying a property! My cell is (661) 714-6258, and my office line is (661) 260-2970 xt. 2222. Please text me at (661) 714-6258 or email me at Mike@AugustaFinancial.com. Have a great day and a better tomorrow! Please call me when you have a client that needs to borrow!