So....I have a lender guru friend that has a package deal for larger home purchases. As prices continue to raise, it only benefits to educate yourself on some or all of the options. Most
Aug 20 2015 11584 2
Hi there... Michele here with more about real estate.
Today (September 21, 2015) we'll look at why INTEREST RATES are important. If you're like 90% of us, you're going to be financing your home purchase. This means borrowing money to help you pay for the home. However, you do have to pay for the opportunity to use someone else's money, and that's in the form of interest.
Great news! Currently interest rates are still at a very LOW percentage level. Will it always be like this? Unlikely. There's already discussion at the Federal Reserve about increasing the rate.
There's a direct relationship between interest rates and how much you can afford to spend on a home. Here's what I mean. The lower the interest rate, the more you can afford to spend on monthly payments. For example, if you can pay $1000 a month in principal and interest, at a 4.00% you can afford to buy about $220,000 home. If interest rates go up to 4.5%, your same $1000 a month will only buy you a $200,000 home. As you can see, this is a pretty significant difference and can mean an extra bedroom, a different neighborhood, a pool, a larger lot!
Oh, and what does "principal" mean? That's how much money you're actually borrowing. If the home price is $200,000, and you put a down payment of 5% ($1000), the amount you're borrowing, or the principal, is $190,000, and that's what you'll be paying interest on. And also, you'll be paying back the principal.
There are other charges associated with your monthly payment. You may have heard of PITI. We've already talked about principal and interest. The "T" stands for taxes. In general your property taxes are included in your monthly payment. The amount varies based on the neighborhood and the value of the home. The second "I" is insurance. An example of insurance is the payment required if you borrow more than 80% of the total value of your home's purchase price. This is mortgage insurance, and gets paid every month until the principal becomes less than 79% of the value of your home. More about that in a future blog!
If you're looking for a lender I have several trusted lenders and I'd be happy to give you my list. Call me at 480-734-4109, or send me a note at the email below and I'll get you the list.
Till next blog!
Michele at MKHomesAZ.com or [email protected]
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