How will the Federal Reserve Raising Interest Rates Impact You?

On December 16^th,  2016 Chairman Janet Yellen announced that The Board of Governors of the Federal Reserve (Head of the Bank of the Banks) were raising interest rates. 

http://www.federalreserve.gov/newsevents/press/monetary/20151216a.htm

Chairwoman Janet Yellen is the first woman to hold this position. Chairwoman Yellen took over the position from Ben Bernanke and was sworn into her office on February 3^rd, 2014 after the senate confirmation in January 2014.

The Prime Rate adjusted in sync with the announcement.  However, most of the loan market already expected this and mortgage interest rates had risen about 0.25% in the 10-14 days before the announcement in anticipation, so there was actually little movement in long terms rates at the time of the announcement.

But, what does this mean for you? What does this mean for your clients? What is the actual cost?

The Federal Reserve has already raised interest rates by 0.25% and plan to continue raising rates 0.25% until next December so there will be a full 1% increase in interest rates. That doesn't sound like much, but for most people it actually adds up. Take a $300,000 home for instance. For each 0.25% increase in the interest rates on a $300,000 loan, that's an extra $43.56 a month. So over, the next year, if you are buying a $300,000 and the interest rates go up by 1%, that's an extra $174.24 a month in interest you'll be paying. That's easily a student loan payment, a car payment or a nice dinner out. If you look at it on an annual basis, it's over $2,090 a year in additional interest costs, which is over $10,400 over the next five years!!  Now, you may think, well, that’s more of a tax deduction for me since it’s interest. Be sure to check with your CPA to see how that change will really impact your bottom line. But I say, a penny earned is a penny save, and even more important, $2,000 saved is by buying now is free money!

So, if you are considering buying a home, do it now! Get pre-approved and start planning now.

These interest rates are for the purposes of example only.  You are not guaranteed these rates, you may or may not qualify for a loan.

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Zillow vs.Trulia

How many of you use Zillow or Trulia?
What's so great about these real estate websites?
Should you use them as part of your home buying process?
For one reporter's opinion (as well as my comments!) check out this article:
zillow-vs-trulia
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How to Get Approved for the Best Mortgage? Get Pre-Approved for Your Mortgage!

What’s the difference between Pre-Qualification and Pre-Approval for a Mortgage?

The differences between pre-qualification and pre-approval may seem minor, but they can be huge when it comes to actually closing on your dream home. Not all lenders offer the more thorough pre-approval. If your lender only offers pre-qualification, or you choose to start with pre-qualification, make sure that you are as thorough as possible with the information that you supply. Pre-qualification is the process of determining what you may qualify to purchase with a home loan. Pre-approval is the thorough process of providing your name, address history, work history and income documents for the last two years, along with your asset statements. It may not seem like a big difference, just more documents and a few more questions to answer. However, it can save you lots of disappointment and heartache during the loan process. In my book, How to Get Approved for the Best Mortgage Without Sticking a Fork in Your Eye (Available April 2015), I strongly recommend that you at minimum pre-qualify. Get pre-approved if it’s an option!

Mortgage Pre-Qualifying or Pre-Approval Make Home Shopping Much Easier

You should get pre-qualified to find out what price range your dream house needs to be within according to your current financial budget. Pre-qualifying allows you to find out exactly how much money a lender is willing to give you based on your income, assets, and other data. Having a pre-qualification will also give you confidence to make an offer when you find the right home. Pre-qualifying or pre-approval can empower you and take the stress out of your home search— you’ll know which homes to consider and which homes to avoid.

3 Monumental Mortgage Money Mistakes to Avoid

☐ Not getting pre-approved

☐ Not understanding your loan options

☐ Not planning/asking the right questions

I explain these mistakes in full detail in How to Get Approved for the Best Mortgage Without Sticking a Fork in Your Eye (Available April 2015). For a FREE EXCERPT from the book, go to BestMortgageBook.info.
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