February 2, 2023

The Federal Reserve raised interest rates by just .250% yesterday, and many Bond traders feel this could be the last raise and that the next move could be to lower rates. The markets have reacted well, and 30-year Mortgage rates have dropped quite a bit since mid-day yesterday, bringing us to our lowest levels since the middle of August. Depending on down and credit score, you can get a rate in the 5.50% (5.56APR) range on a 30-year fixed-rate mortgage. Here is the best part. Prices decreased by about 10% in most markets last year, so below is a comparison of an $800,000.00 property from last year vs. a $720,000.00 property right now.

February 2022 Purchase price –$800,000.00 - $80,000.00 down 3.50% - Principal and Interest $3133.49 + Property Taxes $833.33 + Insurance $100.00 + PMI $150.00 = $4216.82
February 2023 Purchase price – $720,000.00 - $80,000.00 down 5.50% - Principal and Interest $3633.85 + Property Taxes $750.00 + Insurance $100.00 + PMI $133.00 = $4616.85
We can also buy the rate down to 4.99% with 2.5 points (5.15APR), and here is the payment on that one -$720,000.00 - $80,000.00 down 4.99% - Principal and Interest $3431.75 + Property Taxes $750.00 + Insurance $100.00 + PMI $133.00 = $4414.75
We are close to where we were a year ago, but rates are starting to drop, and that will likely help on all avenues.

I want to move to the seller with the 3% rate, a $400,000.00 mortgage, and an $800,000.00 house. They are currently paying $1803 + Taxes $700+/- + Insurance $100 = $2603.00

If they want to sell and buy for $1,075,000.00 and put $350,000.00 down, they will now have a payment of $5545.03 at 5.50% or $5322.51 at 4.99%. Even at a 4% rate they are at $4907.00 per month, and at a 3% rate they go to $4326.00. Explaining that the payment is going up by $2200.00 even if rates are at 3% may help. By the way, they are currently writing off about $12,000.00 in interest annually, and if they buy the bigger house at 5.50%, they will have about $39,000.00 to write off.

That will give them back approximately $6500.00 at the end of the year or about $540.00 of the $1200.00 extra they are paying now vs. a 3% rate.

I know this is a lot, but if your seller is on the fence because of the current interest rate, there is a way to explain why they should sell now and buy now! If values rise 10% between now and the time rates hit 3%, their new house will be 10% higher, and their new payment will be higher too! OK, I will do it!

10% higher price with a 3% rate – $1,182,500.00 purchase price, sell for $880,000.00 and put down $420,000.00. $762,500.00 Loan Amount, 3% rate = $3214.73 + Property Taxes $1232 + Insurance $150.00 = $4596.73. Waiting for rates to hit 3% will cost your seller $270.00 more than the refi payment above at the same rate.

I agree that this case has many what-ifs, but we may have some new answers. I am always willing to put numbers together for you and your seller to show them the advantages of listing their Property. Our jobs are always easier when rates are lower, and we will get there again, but for now, it’s going to take a lot of work to get some people off the fence. It’s about more than just the numbers, as want and need come into play also!

Rates are better today than yesterday, but they increased slightly a bit ago! I like the improvement, and let’s hope it holds.

• 3/2/1 Buydowns 2/1 Buydowns and 1/0 Buydowns are available at great start rates!
• Government Loans (FHA / VA) are in the high 4’s and low 5’s.
• Conventional Loans up to $726,200.00 are in the low to mid 5’s.
• High Balance Loans $726,201.00-$ 1,089,300.00 are in the high 5’s and low 6’s
• Jumbo loans above $1,089,300 are in the high 5’s and low 6’s
• 5/1, 7/1, 10/1 Arms are in the high 4’s and low 5’s
• Bank statement loans - They are available with 10% down again! 7’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 8’s.
• 0 down loans are in the high 5’s to low 6’s- 620 credit score min right now! Low 6’s, for the most part, up to $725,000.00.
• 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 7.49% 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 weekend 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 ext. 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!