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FOR CRIPES SAKES people there are literally MILLIONS of mortgages out there people are happily paying WAY MORE than 6% on.
Not too long ago a rate of 8% or so was PERFECTLY ACCEPTABLE, afterall mortgage interest is about THE #1 DEDUCTION for tax payers, and frankly there are too many people that have been SPOILED with artificially low mortgages.
Get some fresh air. Stop thinking like the sky is falling and do not fall into the mind set that because some one else was able to get a lock at lower rate than you did that you are getting screwed!
FOR CRIPES SAKES people there are literally MILLIONS of mortgages out there people are happily paying WAY MORE than 6% on.
Not too long ago a rate of 8% or so was PERFECTLY ACCEPTABLE, afterall mortgage interest is about THE #1 DEDUCTION for tax payers, and frankly there are too many people that have been SPOILED with artificially low mortgages.
Get some fresh air. Stop thinking like the sky is falling and do not fall into the mind set that because some one else was able to get a lock at lower rate than you did that you are getting screwed!
SHEESH!
Some people like to know exactly what they will be paying in fixed bills when they buy a house. The interest rate (when it is fluctuating the way it is) can play a HUGE part in this, and can sometimes price people out of the house they could afford otherwise - sure they can afford it, but it might make things tight if they really follow a strict budget. An extra $60+ per month might mean they have to adjust their "fun money" or put off savins for a vacation. I'd be pretty pissed off myself if I was locked at 5% then due to circumstances beyond my control be stuck paying 6%+.
Incidentally... those rates were around during the bubble (speaking of recent times). IMO people who bought then were bat sh*t crazy, and turns out... most of them can't afford the homes now. Prior to that (with high or higher interest rates) housing cost significantly LESS (less than what most people are paying today, unless you are buying a foreclosure that most likely needs work). So, cheap housing but high interest rates - but probably affordable, and you can bet those people refinanced when the rates were 4.25%.
So you are saying that you wouldn't be upset if you were put into a situation that meant you were paying the equivalent of an extra stocked cable bill per month because of the volatile market?
There are posts in this thread from people that want to walk away from many thousands of dollars in construction deposits. Then some one does the math and realizes $60 a month is going to cut into their cable expenditure.
Maybe that is why some people are making incredibly ill informed decisions about their personal finances.
$60/month is about 5K on buying a 200K house. There are also posts that sellers struggle to cut their asking price by 5K on 225K house, they don't have that much negotiating room
So the $60/month may very well decide if one is going to buy or not.
Our lenders said we could not lock in until we were 30 days from close, and we talked to mulitple lenders during our pre-approval process which the builder required.
I will say it again, I have never heard of a lender who can't lock you longer than 30 days. Also, there is no way a builder can make you talk to multiple lenders.???
If you are doing new construction you know going in that there will be some rate risk. If you can't tolerate that risk you either need to purchase a new home that has all ready been built, buy an existing home or find a lender that offers long term locks (not sure that last one is an option any longer).
fyi-I am not a broker with the issues mentioned above and hence no real hidden agenda.
Last edited by TimtheGuy; 06-11-2009 at 10:07 AM..
FOR CRIPES SAKES people there are literally MILLIONS of mortgages out there people are happily paying WAY MORE than 6% on.
Not too long ago a rate of 8% or so was PERFECTLY ACCEPTABLE, afterall mortgage interest is about THE #1 DEDUCTION for tax payers, and frankly there are too many people that have been SPOILED with artificially low mortgages.
Get some fresh air. Stop thinking like the sky is falling and do not fall into the mind set that because some one else was able to get a lock at lower rate than you did that you are getting screwed!
SHEESH!
I'm sorry, but I disagree with you. This is a big issue for many buyers (me included). A few years ago, 8% would have been fine. I was also not looking down the short road thinking if I would be able to keep my job in this economy. Many of my executive friends have been out of work for 6 to 9 months and counting! I can't look down the 8% barrel and think that's okay. 5% or 6% is acceptable in this economy. Rates climbing and my lock in period quickly expiring makes me very nervous too. Even if it is just $60/mo. I'm not going to be rich one day by squandering $60 when I don't need to (sorry for repeating my grandfather! LOL).
USAA and Bank of America both would only allow 30 day lock periods during our pre-approvals. I called today, and they both now offer 60 day locks, but no unless I have a determined closing date, which my builder can not provide until they reach the 30 day mark...so again, I am stuck waiting...and watching my interst rates go up. Today, I called and the rates were 5.725 interest rates...last week, it was 5.375, when I got my pre-approval it was actually 4.875, and by the time I get to close it could and likely will be over 6.000.
Pre-approval price per month was $150/mo less than todays rate...and $260/mo less than a rate of 6.225 which would be the price assuming this latest trend continues for the next week or two until I get my 30 day close date. I am not talking about losing $60/mo, $260/mo for the next year is going to cost me over $3k more per year vs. the pre-approval rate. It is kind of annoying that the market has shifted so rapidly...from a 4.61 low to a 5.74 today,and who knows what tomorrow. For my mortgage, this shift would be a $300 swing...so do I lose $12k, and save $3000/yr considering the rate shift in the past 2-3 months. If the economy, job market, etc...are going to be this volatile, why would I want to risk my future on this mess.
Again, this doesn't come free to me...this decision of mine could cost me $12k, but ****...when does it end? At what point do you simply cut your losses? If I needed a house, and wanted to pay a high rate, I would...but I bought because it was a good time to buy from what I could tell. Historically low interest rates, great builder incentives, etc...everything was pretty well aligned to make a good deal, but now, I am simply buying a house just because and personally this rapid fire change in economics has got under my skin and even though 6% is not a bad rate, it sure isn't a great/good rate by any stretch of the imagination.
USAA and Bank of America both would only allow 30 day lock periods during our pre-approvals. I called today, and they both now offer 60 day locks, but no unless I have a determined closing date, which my builder can not provide until they reach the 30 day mark...so again, I am stuck waiting...and watching my interst rates go up. Today, I called and the rates were 5.725 interest rates...last week, it was 5.375, when I got my pre-approval it was actually 4.875, and by the time I get to close it could and likely will be over 6.000.
Pre-approval price per month was $150/mo less than todays rate...and $260/mo less than a rate of 6.225 which would be the price assuming this latest trend continues for the next week or two until I get my 30 day close date. I am not talking about losing $60/mo, $260/mo for the next year is going to cost me over $3k more per year vs. the pre-approval rate. It is kind of annoying that the market has shifted so rapidly...from a 4.61 low to a 5.74 today,and who knows what tomorrow. For my mortgage, this shift would be a $300 swing...so do I lose $12k, and save $3000/yr considering the rate shift in the past 2-3 months. If the economy, job market, etc...are going to be this volatile, why would I want to risk my future on this mess.
Again, this doesn't come free to me...this decision of mine could cost me $12k, but ****...when does it end? At what point do you simply cut your losses? If I needed a house, and wanted to pay a high rate, I would...but I bought because it was a good time to buy from what I could tell. Historically low interest rates, great builder incentives, etc...everything was pretty well aligned to make a good deal, but now, I am simply buying a house just because and personally this rapid fire change in economics has got under my skin and even though 6% is not a bad rate, it sure isn't a great/good rate by any stretch of the imagination.
I feel for you. That's why I said this is a legitimate concern to the OP before somebody comes here and just make a fun out of it.
Good luck to you and do your risk/benefit analysis and take the right decision for you and family. Don't listen the "historically low" crap. We live now!
I will say it again, I have never heard of a lender who can't lock you longer than 30 days. Also, there is no way a builder can make you talk to multiple lenders.???
If you are doing new construction you know going in that there will be some rate risk. If you can't tolerate that risk you either need to purchase a new home that has all ready been built, buy an existing home or find a lender that offers long term locks (not sure that last one is an option any longer).
fyi-I am not a broker with the issues mentioned above and hence no real hidden agenda.
I agree with Tim the Guy - if you aren't willing to take the rate risk then why are you building? There are plenty of existing homes that are available for sale. If your budget is that tight you need to go with the safe option.
Okay, look. I don't need a house! I'm not crying here. I'm not emotional about this. This is business. I'm not married, so buying a house is not "starting a life" for me. I gross $55K to $60K, the house price is $136K, and I'm only putting $7000 down (and paying a good portion of closing costs). By rights, I ordinarily shouldn't be able to buy a house. Which works out fine, because I ordinarily wouldn't consider buying a house.
Look down on me if you want, but at 6.5% or 7% or 8% a house would not be something I'd want to expend cash for. It's irrelevant to me that people are "happily" paying 8% and up.
At 4.x% and considering the $8000 incentive, and finally finding a floorplan that makes a lick of sense, the house became attractive. Yes, I was prepared for an increase. I'm already over $100/month -- $1200/year -- $36,000 over the life of the loan. A 9.3% increase in total monthly payment (PITI) and 14% increase in the PI portions. At 7%, I'm being hit with a 17% increase in PITI and a 26% increase in PI. And up from there. It's easily in the realm of possibility that the mortgage goes from 30% of my net income to over 40% of my net income, based on the large increases we've seen.
The safe option was not to buy at all. I looked at an extensive range of existing homes while my ex-girlfriend was looking for a house last year and never really found what I was looking for. Some of the floorplans were demented.
I went with full foam insulation throughout the house to save $60/month on electricity to avoid pointlessly throwing money at the utility company, and would end up pointlessly throwing a couple hundred/month at the mortgage company.
I haven't canceled yet. I'm a meticulous budget-keeper and have been running through the various ways to cut my savings, social life, and/or planned furnishings/upgrades to meet the rates which have already gone from mid to high 4 through 5 and on to low 6. And on to....?
We'll see.
Last edited by Nepenthe; 06-11-2009 at 09:40 PM..
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