Gina Interviews the Denver Loan Guy

The Denver Loan Guy Demystifies the Mortgage Process

(and why it’s still a good time to buy)

Regina’s Q&A with Mike Kazell, senior loan officer with Fairway Mortgage Corp.

RP: So Mike, as of mid-December, what’s up with mortgage rates?

MK: While interest rates are still historically low they are inching up, and many analysts think that in 2011 they are headed higher. What was 4.25 a few weeks ago is now around 4.75. Still a tremendous rate, but the difference in that half-percent can impact a homebuyer in two ways. First, and most obviously, it will make their monthly payment higher. And also, it could reduce a buyer’s “buying power.”

RP: How do you mean?

MK: For example, say you can afford a $1,2000 a month mortgage payment. At 4.25 percent you could consider a home priced at $185,000*, but at 4.75 percent, and to keep your payment at that magic number of $1,200, you might only be able to afford a $170,000* home.

RP:  What can that half-percent do to a monthly payment?

MK: On a $200,000 loan, a half-percent can add $60 a month to your mortgage payment. Over the course of 30 years that’s $21,600. Whether it’s a young family just starting out, or a retired couple settling into a smaller nest, $720 a year can be a dramatic savings.

RP: Given all that, is now still a good time to buy?

MK: It really is. The market still has a surplus of inventory and rates, if not rock bottom, are very low. Combine those two factors and it remains a buyer’s market. The longer they wait the likelihood of rates continuing to climb is pretty good. When you show someone that the potential exists that they could lose 10 to 20 percent of their purchasing power it’s a real eye-opener. In my opinion, it sends that sense of urgency people that need to take advantage of the situation.

*This purchase price is assuming the use of an FHA loan and the projected $1,200 per month includes taxes, homeowners insurance, and FHA mortgage insurance.

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