January 27, 2022

I hope you are having a wonderful week, and I hope things are going well.

I keep hearing clients upset about interest rates climbing, and yesterday’s word from the Federal Reserve did not help things in the short term. I hate speaking about interest rates because they are out of my control! The one thing I can do is advise my clients, and I think I do that pretty well. If your clients feel that interest rates are too high (which they are not), then here are a couple of shorter-term options:

Say I am buying an $800,000.00 property, and I am putting 20% down, and I am now upset that my rate went from 3.00% to 3.750% (3.81APR). Well, here are a few options below:
Buydown the interest rate – Pay 1 point and get the rate down to 3.50% or pay 2 points and get down to 3.250% on a 30 year fixed rate
Look at a 5, 7, or 10-year Mortgage and buy down the rate on those too.
5 year ARM – 2 Points 2.625% (2.81APR)
7 year ARM – 2 Points 2.750% (2.81APR)
10 year ARM – 2 Points 2.875% (2.81APR)
These loans buy down well, but at 0 points, the rates are very comparable to the 30-year rate. 1 Point is 1% of the Loan amount! These loans are fixed for 5, 7, or 10 years, and they amortize over 30 years.
Loans amounts over $647,200.00 can be bought down to 3.00% on a 10 year ARM.
Loans under $647,200.00 can be done with as little as 10% down on the ARMS
Now to the math part of the show.
John and Sally go to buy an $800,000.00 house, and they freak out when they hear that interest rates went up and they thought they had been locked in since September when they started looking for a house. If they were at 3.250%, they would be fine, but they are over their budget now and are just going to continue renting for the next 75 years! Or, we can offer them an ARM. At 3.750%, their new payment would be $2963.94+ Taxes and Insurance, but if they get the 10/1Arm then the payment goes down to $2655.31, and in 10 years, they would have saved $37,035.38 in payments, and they would owe $484,226 at the end of 10 years. If they got the 30-year Mortgage at 3.75%, they would owe $499,915 at the end of 10 years. So by getting a 10 year fixed rate today, they will save $52,724 over the next ten years.

Yes, the loan cost an extra $12,800.00, so the actual savings $39,924.37. The big question is, where will rates be in 10 years, or will the client be ready to move? A lot can change in 10 years, and we know that many people want bigger and better and feel they will get there, so sell the dream! LOL!

Interest rates had a rough day yesterday, but they improved slightly today! In the past 50 years, interest rates have been under 3% for 12 months! They have been between 3.00% and 3.5% in 16 months, and they have spent 55 months between 3.5-3.99%. So that leaves 517 months at 4% or higher! I hope that puts these rates into perspective for you and your clients!
30-year Government Loans (FHA / VA) are in the low 3’s
Conventional Loans up to $647,200.00 – mid to high 3’s
High Balance Loans $647,201.00-$ 970,800.00 are in the mid to high 3’s and low 4’s.
Jumbo loans above $970,801 are in the high 3’s. We can do low 4’s with as little as 10% down. We can do 1-year findings on these too!
5/1, 7/1, 10/1 Arms are in the high 2’s and low 3’s!
Bank statement loans – They are available with 10% down again! low 4’s to low 5’s depending on down and credit score.
Stated income loans – I have one bank with 30% down, but everything else has to be perfect! Interest rates are in the mid 4’s.
0 down loans are in the low 4’s – 620 credit score min right now! Mid 3’s for the most part up to $670,000.00 Price.
0 down Jumbo to 1.2 Mil – 700 credit score – call for a quote
Private Money lenders – hard Money Loans – 35% down!
No Ratio Loans 30% down
Debt Service Coverage loans with as little as 25% down
Bridge Loans – are typically 4.99 – 5.99% with limited fees – But they get you where you need to go!
Interest rates are subject to change without notice! Above are LA County Loan Limits.

I will be around all weekend if you need anything. My cell is 661-714-6258, and my office line is 661-260-2970 xt. 2222. Please text me at 661-714-6258 or email me at Mike@AugustaFinancial.com. I have a client visit with my Dad at SOFI Stadium on Sunday starting at about 3PM, and I will be on quiet time until after 7PM on Sunday. Go Rams!!! Have a great day and a better tomorrow! Please call me when you have a client that needs to borrow!