Comments on: Swap Higher Interest Rate for Lower Loan Amount? http://blog.redfin.com/sfbay/2008/09/swap_higher_interest_rate_for_lower_loan_amount.html Redfin Bay Area Sweet Digs Tue, 07 Feb 2012 16:59:16 +0000 hourly 1 http://wordpress.org/?v=3.0.1 By: Janis Mara http://blog.redfin.com/sfbay/2008/09/swap_higher_interest_rate_for_lower_loan_amount.html/comment-page-1#comment-7671 Janis Mara Thu, 18 Sep 2008 16:41:11 +0000 http://blog.redfin.com/sfbay/2008/09/swap_higher_interest_rate_for_lower_loan_amount.html#comment-7671 Okay, looks like that's taken care of now and your post with the Mechanics Bank links is live. Okay, looks like that’s taken care of now and your post with the Mechanics Bank links is live.

]]> By: Janis Mara http://blog.redfin.com/sfbay/2008/09/swap_higher_interest_rate_for_lower_loan_amount.html/comment-page-1#comment-7670 Janis Mara Thu, 18 Sep 2008 16:35:40 +0000 http://blog.redfin.com/sfbay/2008/09/swap_higher_interest_rate_for_lower_loan_amount.html#comment-7670 Brandon, HUGE thanks for that information! It's invaluable. It finally dawned on me what's going on: I think Redfin blocks posts with links for fear of comment spam, you know, when some commercial entity searches for posts related to its product and then drops in a generic post with a link? I am really grateful for the pointers. At times like these, it's critically important for people to know how to protect themselves. So, thanks again. Brandon, HUGE thanks for that information! It’s invaluable. It finally dawned on me what’s going on: I think Redfin blocks posts with links for fear of comment spam, you know, when some commercial entity searches for posts related to its product and then drops in a generic post with a link?

I am really grateful for the pointers. At times like these, it’s critically important for people to know how to protect themselves. So, thanks again.

]]> By: Brandon http://blog.redfin.com/sfbay/2008/09/swap_higher_interest_rate_for_lower_loan_amount.html/comment-page-1#comment-7666 Brandon Thu, 18 Sep 2008 01:49:38 +0000 http://blog.redfin.com/sfbay/2008/09/swap_higher_interest_rate_for_lower_loan_amount.html#comment-7666 Janis, the Mechanics Bank actually posts their FDIC "Consolidated Reports of Condition and Income" on their website. You might also be interested in the PDF file posted under "New Announcements" on the frontpage. I tried to post links but Redfin blocked my posts for some reason. Janis, the Mechanics Bank actually posts their FDIC “Consolidated Reports of Condition and Income” on their website.

You might also be interested in the PDF file posted under “New Announcements” on the frontpage.

I tried to post links but Redfin blocked my posts for some reason.

]]> By: Brandon http://blog.redfin.com/sfbay/2008/09/swap_higher_interest_rate_for_lower_loan_amount.html/comment-page-1#comment-7665 Brandon Thu, 18 Sep 2008 01:43:29 +0000 http://blog.redfin.com/sfbay/2008/09/swap_higher_interest_rate_for_lower_loan_amount.html#comment-7665 Janis, In that case you would be interested in the following links: http://www.mechanicsbank.com/mechbank/TMBwebsite.nsf/BusterAnnouncementFDICIns.pdf http://www.mechanicsbank.com/mechbank/TMBwebsite.nsf/about/financials Janis,

In that case you would be interested in the following links:

http://www.mechanicsbank.com/mechbank/TMBwebsite.nsf/BusterAnnouncementFDICIns.pdf

http://www.mechanicsbank.com/mechbank/TMBwebsite.nsf/about/financials

]]> By: Janis Mara http://blog.redfin.com/sfbay/2008/09/swap_higher_interest_rate_for_lower_loan_amount.html/comment-page-1#comment-7663 Janis Mara Thu, 18 Sep 2008 01:25:33 +0000 http://blog.redfin.com/sfbay/2008/09/swap_higher_interest_rate_for_lower_loan_amount.html#comment-7663 Oh, excellent points, Brandon! If I wanted to switch to, say, Mechanics Bank, which is based in Richmond, would I go to the FDIC Web site to check those balance sheets? That's good information. Brandon, how did ANYBODY buy a house in the 1980s? That's terrifying! Oh, excellent points, Brandon! If I wanted to switch to, say, Mechanics Bank, which is based in Richmond, would I go to the FDIC Web site to check those balance sheets? That’s good information.

Brandon, how did ANYBODY buy a house in the 1980s? That’s terrifying!

]]> By: Brandon http://blog.redfin.com/sfbay/2008/09/swap_higher_interest_rate_for_lower_loan_amount.html/comment-page-1#comment-7662 Brandon Thu, 18 Sep 2008 00:27:39 +0000 http://blog.redfin.com/sfbay/2008/09/swap_higher_interest_rate_for_lower_loan_amount.html#comment-7662 "Additionally, the interest rates for the best borrowers are really ridiculously low right now. Unfortunately prices are still pretty high." Isn't that what you would expect? A low interest rate supports a higher price for a certain monthly payment. Here's a chart of historical 30-year fixed mortgage interest rates: http://mortgage-x.com/images/graph/fhfb_contract_rate.gif It's rather difficult to surmise any sort of trend from this data, other than in the early 80's interest rates were brutal! Let's play what-if for a moment and explore the effect of a 10.0% interest rate. Our well qualified buyer wants to buy a $670K home in San Mateo and has 20% down, making the mortgage about $530k. The buyer gets a 30 year fixed mortgage and the payments are $4,700 / month. OOPS, what happened! “Additionally, the interest rates for the best borrowers are really ridiculously low right now. Unfortunately prices are still pretty high.”

Isn’t that what you would expect? A low interest rate supports a higher price for a certain monthly payment.

Here’s a chart of historical 30-year fixed mortgage interest rates:

http://mortgage-x.com/images/graph/fhfb_contract_rate.gif

It’s rather difficult to surmise any sort of trend from this data, other than in the early 80′s interest rates were brutal!

Let’s play what-if for a moment and explore the effect of a 10.0% interest rate. Our well qualified buyer wants to buy a $670K home in San Mateo and has 20% down, making the mortgage about $530k. The buyer gets a 30 year fixed mortgage and the payments are $4,700 / month. OOPS, what happened!

]]> By: San Mateo Home Sellers in Trouble http://blog.redfin.com/sfbay/2008/09/swap_higher_interest_rate_for_lower_loan_amount.html/comment-page-1#comment-7660 San Mateo Home Sellers in Trouble Wed, 17 Sep 2008 22:54:20 +0000 http://blog.redfin.com/sfbay/2008/09/swap_higher_interest_rate_for_lower_loan_amount.html#comment-7660 I think another problem is that a lot of "well qualified borrowers" already bought in the last three years because of the low interest rates and constant barrage of propaganda that it was an awesome time to buy. In all honesty I think the current climate is a really a good time to buy because of the high supply and low demand. Additionally, the interest rates for the best borrowers are really ridiculously low right now. In fact I dare say that the mortgage rates available now are probably lower than real inflation rates. Unfortunately prices are still pretty high. San Mateo for example has a median household income of around $70 to $80k, but the median home sale price is still $670k according to the last dataquick report. That just doesn't compute. For it to be reasonalbe again the prices need to fall at least 50% more, but I think that's unlikely. I think another problem is that a lot of “well qualified borrowers” already bought in the last three years because of the low interest rates and constant barrage of propaganda that it was an awesome time to buy. In all honesty I think the current climate is a really a good time to buy because of the high supply and low demand. Additionally, the interest rates for the best borrowers are really ridiculously low right now. In fact I dare say that the mortgage rates available now are probably lower than real inflation rates. Unfortunately prices are still pretty high. San Mateo for example has a median household income of around $70 to $80k, but the median home sale price is still $670k according to the last dataquick report. That just doesn’t compute. For it to be reasonalbe again the prices need to fall at least 50% more, but I think that’s unlikely.

]]> By: Brandon http://blog.redfin.com/sfbay/2008/09/swap_higher_interest_rate_for_lower_loan_amount.html/comment-page-1#comment-7659 Brandon Wed, 17 Sep 2008 22:33:50 +0000 http://blog.redfin.com/sfbay/2008/09/swap_higher_interest_rate_for_lower_loan_amount.html#comment-7659 I suspect that well qualified buyers in the traditional sense such as those with 20% or greater downpayment, reasonable LTV, etc. will always be able to get home loans. Consider that there are a number of small household banks and credit unions in the Bay Area and many of them are currently well capitalized with little or no exposure to the sub-prime or exotic mortgage market (this can be verified by reviewing monthly balance sheets submitted to the FDIC). I believe the real question is how many buyers in the Bay Area will continue to fall into the "well qualified buyer" category? Conversely, how far do home prices have to fall before this category of would-be buyers becomes well populated? I suspect that well qualified buyers in the traditional sense such as those with 20% or greater downpayment, reasonable LTV, etc. will always be able to get home loans.

Consider that there are a number of small household banks and credit unions in the Bay Area and many of them are currently well capitalized with little or no exposure to the sub-prime or exotic mortgage market (this can be verified by reviewing monthly balance sheets submitted to the FDIC).

I believe the real question is how many buyers in the Bay Area will continue to fall into the “well qualified buyer” category? Conversely, how far do home prices have to fall before this category of would-be buyers becomes well populated?

]]> By: Janis Mara http://blog.redfin.com/sfbay/2008/09/swap_higher_interest_rate_for_lower_loan_amount.html/comment-page-1#comment-7656 Janis Mara Wed, 17 Sep 2008 21:02:38 +0000 http://blog.redfin.com/sfbay/2008/09/swap_higher_interest_rate_for_lower_loan_amount.html#comment-7656 Right, the loan, sorry. So David and SMHSIT, the Monday meltdown on Wall Street means it will be even harder to get home loans, right? Which should somewhat offset the increasing affordability of homes in the Bay Area? Right, the loan, sorry. So David and SMHSIT, the Monday meltdown on Wall Street means it will be even harder to get home loans, right? Which should somewhat offset the increasing affordability of homes in the Bay Area?

]]> By: David http://blog.redfin.com/sfbay/2008/09/swap_higher_interest_rate_for_lower_loan_amount.html/comment-page-1#comment-7655 David Wed, 17 Sep 2008 20:59:05 +0000 http://blog.redfin.com/sfbay/2008/09/swap_higher_interest_rate_for_lower_loan_amount.html#comment-7655 It's not the house, it's the value of the note (and its income stream). but in practice it'd be about the same thing. It’s not the house, it’s the value of the note (and its income stream). but in practice it’d be about the same thing.

]]>