How Much More Will A Mortgage Cost You Starting In 2011?
How much more will it cost to borrow money to buy a home? Or diffcult?
Are you aware that the cost of borrowing money could be going up in the very near future? Many buyers focus on the price of a home and though this important they should also pay close attention the cost of attaining a mortgage to purchase this home. Here in the San Diego real estate market we’ve gone through price falls just as the rest of the nation but we’re now seeing prices stabilizing and in some zip codes rising slightly.
In recent years, as part of a way to help the recovery of the real estate market, interest rates were lowered to historical lows to make it less expensive to but a home and thus help the market by encouraging consumers to buy more homes. At one point the rate of 30 year fixed mortgage was in the low 4% range which is an unheard of rate. For those of us that remember the 80’s rates back in those days were around 18% or so. That’s like paying your home with a credit card!
Fast forward to 2011. Due to the recent loose lending practices of the past few years there are some changes coming to the lending industry. Future borrowers are going to pay for all of those wonderful loans, mind you made by some of the same banks that were bailed out by the tax payers and are still in business today, with little to no money down and questionable documentation. Gone are the days of what was refer to as “creative financing”. Creative because those loans should never have been made.
The lending industry is under some pressure to change their lending guidelines to avoid another financial crisis similar to the one we saw on the news everyday a few years back. This means that the cost of a mortgage is going to go up. Among several factors raising the cost of obtaining a loan and mortgage rates are changes to how loan brokers are compensated for originating a loan, the new assessment of loan fees to borrower with credit scores above 720, higher mortgage insurance premiums, new costs to lenders to comply with Dodd-Frank regulations that lenders are sure to pass along to the consumer and many more.
If you’re still not convinced consider this, the 30 year fixed mortgage rate right now is around 5%. That’s about 1% higher than it was a year ago. If you read my post yesterday then you know that there are new requirements for how much of a down payment buyers will be required to make being debated by banking regulators. The amount buyers are going to need and pay to buy a home is going to get more expensive not cheaper in the future. The American Dream of home ownership is a great thing and it’s still attainable to larger amount of the American population. So for those buyers sitting on the fence I suggest that you evaluate your situation and if the time is right to move forward with your home purchase go for it. It’s still a great time to buy and it’s still a great idea to become a homeowner.
Prudential California Realty is ready to go to work for you. “What can Pru do for you?” (619) 851-1078
