I was recently speaking with a mortgage lender that we work with at Homes By Ursula and the very stimulating topic of mortgage backed securities came up. I know, you are jealous and wish you could have been there. I thought I would share the main point of this conversation with you. This is critically important information for you to know, especially if you are buying a home in Metro Atlanta Georgia or anywhere else for that matter.
This graph shows a projection of the buying of mortgage backed securities this year in 2014. The FED announced that they will reduce the purchases each time unemployment numbers get better, however, they have tapered even with unemployment numbers staying the same.
The FED started Quantitative Easing after the market collapsed. They lowered the federal funds rate (the rate at which banks lend to each other) to ZERO (0%) to stimulate the economy. They kept injecting more and more money into the bond market and as the economy “recovers” they are tapering off.
The less in MBS (mortgage backed securities) purchases they make, the higher the rates will go. By the FED (Federal Reserve Bank) buying MBS they are subsidizing rates, which is pulling the rates artificially lower. If this projection is accurate, we will definitely see a hike in mortgage rates later this year. Remember that with every 1% in rate hike, home borrowers qualify for an average of 11% less in sales price. For example, if your loan amount was 300,000 at an annual percentage rate (APR) of 4%, the Principal and Interest (P&I) would be $1432, but that same loan at 5% puts the Principal and Interest payment at $1610, exactly an 11.1% hike.
This means if you buy before rates go higher, you can qualify for a bigger home but if you wait and the rate increases by 1%, the maximum approved loan amount would be reduced by 11% to keep the payment the same. So, if your maximum P&I payment was $1450 per month, being qualified for 300k now would be reduced to 270k if rates go up 1%. So, while youu may be qualified for a $300,000 mortgage now, if you wait around and the rate increases by 1%, you will only qualify for $270,000.
If you are selling you home, don’t think you can overlook this information. The reason for this is twofold. One, If you are selling your current home, you are probably buying another home. If you will need financing for your purchase, this will affect you also, Second, as the cost of borrowing money goes higher, there will probably be fewer buyers for you home.
While every situation is unique, whether you are buying or selling a home in Metro Atlanta Georgia, you need to consider more than just how many bedrooms and bathrooms there are. The right timing for your real estate transaction could either make or cost you thousands of dollars. Don’t wait to get the information you need.
At Homes by Ursula, we align ourselves with the best to make the sale or purchase of your Metro Atlanta home as smooth as possible.
I would like to thank Lindsay Moss-Frangie with WestStar Mortgage (404) 437-RATE (7283) for her generosity and time for providing the graphic, data, and explanation of the information contained in this article.If you or someone you know are thinking about buying or selling Real Estate in the Metro Atlanta, Georgia area, Please call us at 678.825.4428 or visit our website at www.HomesByUrsula.com
Keith and Ursula work to understand your motivation and your goals when you are ready to buy your next home or sell your current home.We work to ensure that the sale of your home happens smoothly and for Top Dollar. At Homes by Ursula, we understand that clients come first and your complete satisfaction is our main goal. Don’t choose the wrong Real Estate Agent – Make the Right Choice – Choose Homes By Ursula!