THE UP & UP

 Up can be a good or bad thing:  Moving up, uplifting, upgrade = good. Uppity, up-ended, upset = not so good.  While raising one’s profile and awareness can go either way, most anyone would be thrilled with a getting a raise at work.  A raise in interest rates however is far from good news for a lot of people on different points of the housing spectrum.  While it’s difficult to predict what mortgage interest rates will do tomorrow, next week or in the coming months, it’s important to know who rate increases will affect – and how.  If you are….

Considering a refinance?  Higher rates may mean you won’t get the savings you had hoped for on your monthly payments and the change in payment may not be enough to make a refinance worth the closing costs – depending on how long you plan to stay in the home. Here’s some good news and bad news:  The U.S. Government has recently rolled out the Home Affordable Refinance Program 2 – or HARP 2.  You can get details on my recent blog post:  Underwater Refinance Help – HARP 2 Update .  The Federal Housing Administration has also announced changes to thier mortgage insurance program that could allow for many who couldn’t previously refinance to take advantage of a chance to lower their rate with a streamline refinance without an appraisal.  This is FHA’s solution for an underwater refinance.  The bad news?  Higher mortgage interest rates could dilute the positive effects these initiatives were designed to create and significantly decrease the number of people who can benefit. 

Considering buying your first home, a move-up home or investment property?  Think higher payments and less property.  Higher mortgage interest rates means interest will take a bigger bite out of the monthly amount you qualify to pay based on your down payment, income and other qualifying factors.  Depending on the size of a rate increase, these upticks can literally shave BEDROOMS off what buyers are able to buy.  That four bedroom, two bath can turn into a three bedroom, one and a half bath quickly.  People wanting more space, different school districts or other move-up perks may find that the opportunities are fewer and less attractive and investors would see shrinking cash flow. 

All in all, a raise in interest rates is a drop in what homebuyers can buy and possibly even the number of homebuyers.  The phrase, “what goes up, must come down” has proven true in every case that I’ve tested it.  With our economy being cyclical, we can pretty much count on the reverse of that adage being true when applied to the cost of money…what came down will go up.  The question is:  When, how much and how fast? 

The upside?  There’s still time to act.  Mortgage interest rates are still at or near (I know, you keep hearing this but it’s true) historic lows.  That is important to remember in the grand scheme of time and money, for if you buy a home or refinance a mortgage at today’s rates, you’ll paying less for the money you borrowed and can make those savings work for you in other ways – for savings, college funds, retirement plans and more.  My advice right now?  Get up and consider where you are and if there’s any possibility you might want or need to take action that mortgage interest rates can affect.  You can study up on your options and Contact Us Today.  If you’re wondering about buying your first home, moving into a new home, or refinancing, you can get started online:  Mortgage Prequalification or  Refinance Pre-qualification Worksheet or call us at 952-808-2810.  If you’re just getting started as a first time home buyer, attend our free first time home buyer class April 19th from 6:30-8PM at Cornerstone Mortgage Company in Burnsville - 436 Gateway Blvd.  This class is specifically designed to explain the home buying a mortgage process to the first time home buyer in Minnesota.  There are a large number of “uppers” for the first time home buyer in Minnesota today including reduced interest rate programs and down payment assistance programs.  Register for this First Time Home Buyer Class Now.