Podcast - 3/1/24

🏠💰 How do changing mortgage rates impact you? 💰🏠

If you're in the market to buy a home, understanding how even a small change in mortgage rates can affect your purchasing power is crucial. Tune in to our latest podcast episode where we break down specific examples of loan amounts and the difference in payments between rates of 6%, 6.5%, and 7%. Don't miss out on valuable insights that could save you thousands! 📉💸

🏡 The Truth About Down Payments 🏡

Planning to buy your first home? Don't let the misconception of needing a 20% down payment hold you back. In reality, it's typically not required to put down that much. Learn more about down payment options and get one step closer to your homeownership dream! 🌟

And as always, don't forget to check out our #HouseoftheWeek:
📍 10612A Daysville Rd Walkersville
💰 $725,000
🛏️ 5 bedrooms, 4.5 bathrooms
🌳 3-acre lot
🔥 Gas fireplace
🍳 Stainless steel appliances & granite countertops
🏊‍♂️ Pool & chicken coop
🌞 Open house:
- Sat 3/2 1pm-3pm
- Sun 3/3 12pm - 2pm

Mark your calendars and come see this stunning Craftsman-style home in person! #RealEstate #HomebuyingTips 🌟

Tom Whalen:

I'm Tom.

Jay Day:

I'm Jay.

Tom Whalen:

of Jay Day and the Day Home Team at LPT Realty, once again, weekly real estate podcast, state of the industry. What are we going with this week, Jay?

Jay Day:

I figured. Let's talk about another hot topic is we were talking, we talk interest rates and it's a constant up and down things are always changing. We were in a spot where we had some interest rates hitting with the number five in it, and then we had a knee jerk reaction where things went back up and into the upper sixes and sevens, and it's easy to talk about it and say the numbers change, the interest rates fluctuate all the time. But one of the things that I really wanted to mention and get the details on for you is what does that look like in a monthly payment? So I want to give some details here. Now, realize these numbers I give you for these mortgage payments, that is only your mortgage principal and interest. So your principal payment and your interest payment, that does not include your insurance. It does not include the taxes for the state or city that you're in that you have to pay monthly as well tied in with your mortgage. And if there's an HOA or condo fee that's not included either. This is just if at these sales prices I'm going to give you and these interest rates, this is what the payment is before having your taxes, insurance, HOA, condo fees, all that stuff tacked on. The reason I want to explain it is to see what that big difference is when a rate changes by half a percent. So we'll start with a low loan amount, and to be very honest, there's not much in Frederick County. Now, as we go out into our outskirts and different areas we cover, you can get homes for 250,000. Again, not really here in Frederick, if the rate was 6%, your principal and interest payment on that is $1,498. So just under 1500 bucks when the rate changes and it goes to 6.5%, that takes you up to $1,580. If it goes up to 7%, that's $1,663. So from the highest down to if it went from, if rates change from six to 7% over the course of a day and a half, two days, your payment monthly increases by almost $165.

Tom Whalen:

Depending on your financial situation, that can really affect your quality of life on a monthly basis.

Jay Day:

Oh yeah. So then let's go to 450. And 450 is what they consider the median income for Frederick County and not income, but the median sale price here in Frederick. So 7% interest rate for 450. And again, this isn't the whole mortgage payment. I just want to make sure people understand that this is only principal and interest. So let's say for example, lemme just throw something out there. Let's say that you're, and I'm going to throw a high number out there just to make math easy. Say that your real estate taxes, you're in Frederick City and your real estate taxes are $12,000 a year. You pay that as part, most people pay that in their mortgage, and that would add a thousand dollars a month to the mortgage payment if you're in Frederick City and you have that high of a basis for that. But, so 450,000, 7%, your principal and interest is 2993.86. If the rates are six and a half, it's 2844.31. If it's 6%, it's 2697.98. So $295.88 a month different from 6% and 7%. So that's almost $300 extra every month just on your mortgage payment because the rates fluctuated in a day, day and a half.

Tom Whalen:

Well, a normal person, they could have a monthly bill of $300 for something else.

Jay Day:

Oh yeah. Look,

Tom Whalen:

And then they get swallowed up by that mortgage payment.

Jay Day:

Well, think of it, you go to the grocery store and sometimes you get the bill and I'm like, I only have four bags. How the heck was that? It's shocking.

Tom Whalen:

I'm fascinated every day by what you're talking about.

Jay Day:

And then we'll go on a high end, and it's not unusual. There are a lot of detached homes in Frederick County that are in the 800,000 range. If you had a home loan for 800,000 and your interest rate was 6%, that's 4796 a month, principal interest, six and a half percent is $5,056 a month and change. 7% is 5322.42. So from 6 to 7%, that's a $526 difference a month.

Tom Whalen:

That is a huge difference.

Jay Day:

Yeah. So when people are talking about, and I wanted to bring that up because of the affordability factor and the pain factor that people are feeling, remember it wasn't that long ago that people were getting 4%. Notice none of these were four. So you can imagine if we went from six to seven and that's in that 450,000 range, let's say it's about $300 a month. If you went from people that were approved at a 4% and now it's a 7%, you're talking maybe $600 a month difference. I mean, that's massive. You can't afford it anymore.

Tom Whalen:

No, you can't afford it. Absolutely.

Jay Day:

So I know on some of these podcasts we've talked about, this is why getting your pre-approval done is important. And even before you write, you need to know what the rates are because you may have been approved yesterday, but you're not approved today or you may be approved, but your comfort level, if your mortgage payment's going to go up $150 a month, you're not comfortable with that. So you shouldn't be writing on that house if you're not going to be good with that payment. So it is beyond crucial, in my opinion, to make sure you're tied in very tight with your agent. Your agent is working very closely with your mortgage advisor who's doing your loan so that they can inform you on things. Because sometimes people don't understand. It's like same thing, you can't lock your rate until you have a house under contract. So if you were quoting you, let's say today was a good day and rates were 6%, and you wrote on a house this weekend, you got the contract accepted, you go to lock your rate, you find out about your contract gets ratified on Sunday, you call the loan officer on Monday, and on Monday the interest rates jumped from six to six and a half percent.

Tom Whalen:

So you're no longer locked in at that point.

Jay Day:

Yeah, you're not locked in at all until,

Tom Whalen:

Yeah, you thought you were taking care of business Monday. We're getting it done.

Jay Day:

And then you find out and you're like, oh, wow.

Tom Whalen:

I see. That's why you need to listen to these podcasts and call the pros.

Jay Day:

Yeah, it's really important. And I mean, the other thing too is people ask about down payments and how much down payment money is required, and this is where first time home buyers get overwhelmed because they think you need 20% down. You do not need 20% down. The 20% down, what that does is that eliminates mortgage insurance. So the numbers I gave you for those mortgage payments, I didn't even mention that. So again, that was your principal and interest. Then you have to add, again, taxes, your insurance on your house, and then if you didn't put 20% down, you need to add your mortgage insurance premium on top of that.

Tom Whalen:

Just explain mortgage insurance. What does that ensure?

Jay Day:

So mortgage insurance has nothing to do with, and it doesn't protect you technically, the mortgage insurance is you have to pay for this in order to protect and ensure the bank that's lending you the money that if you default, they can make a claim for the default.

Tom Whalen:

I see.

Jay Day:

So it protects the bank.

Tom Whalen:

I understand.

Jay Day:

And that's why the bank says, hey, if you're going to put 20% or more in, you've got enough skin in the game, you don't need to buy insurance for me. If you're going to put less than 20% down, I need you to pay more every month so that it can cover an insurance policy in case you go into default.

Tom Whalen:

These podcasts are amazing. I've never heard you mention those terms. Mortgage insurance. Thank you for explaining.

Jay Day:

And it's funny, I do a real rough idea of what I want to talk about, and then as we get into it, I'm like, you know what? I didn't even include the mortgage insurance talking about it.

Tom Whalen:

There's something else. There's a lot of little fires that come up.

Jay Day:

Yeah, there really are. So if you're listening to this and you're really curious about the mortgage side, again, we're not loan officers. We don't do the mortgages. We will connect you with a partner who you can rely on, and I'm going to say it, the internet companies, the ones that you can't reach a person, the ones that just have you do stuff online, they're not giving you the details. They're not digging into all of this. This is why it's really important to make sure you're dealing with someone who's an expert that you can reach immediately. You can get answers and they're not annoyed by your questions because that's the thing. You also don't want someone like, well, when you're dealing with these big companies, you're a number and they're getting so many inquiries. If you haven't actually bought something or done something, they may make the priority somebody else. So it's important to get the education on this, and that's why we work with the lenders we work with. But so if you're curious, just check out our website dayhometeam.com. Our mortgage lenders are on there. You can actually click a button and it sends them a notification if you want to just talk to them and not even talk to us yet. So feel free to do that. We see those come through on a semi-regular basis where people just want to talk to the lender to see if they can even do anything before they talk to us as an agent. But you're ready for the house of the week,

Tom Whalen:

What you just said. That's the move you need to make. Talk to the lender first. Come in with all your numbers together before you come in with Jay. It's going to save everybody time and headaches.

Jay Day:

So house of the week. This area is near and dear to you, my friend. 10612A Daysville Road in Walkersville.

Tom Whalen:

I saw this home. It's beautiful.

Jay Day:

Yes. Oh, so you did, you saw it.

Tom Whalen:

I saw it on social media.

Jay Day:

Okay.

Tom Whalen:

It's a beautiful home.

Jay Day:

Yeah. So 725,000, Walkersville. Super convenient. Like I said, very near and dear to you. You spent quite a bit of time in Walkersville.

Tom Whalen:

A long time. Yes. I love it There.

Jay Day:

It's five bedrooms, four and a half bath, craftsman style home, three acres, open floor plan, a gas fireplace, stainless steel appliances, granite countertops, custom cabinetry. A massive center kitchen island, fully finished basement, a pool. If you want to get, as we talked about, saving some money on groceries. They have a chicken coop so you can have your own eggs. Farm fresh eggs are just so different. They really are.

Tom Whalen:

They do hit different. I love 'em.

Jay Day:

They have a covered deck patio area. The home is energy efficient. You can go to wfre.com, look at Tom and Jay's real estate podcast to see the house of the week, or if you just want to go and check it out, we are having an open house Saturday and Sunday this weekend. So Saturday the open house is 1:00 PM to 3:00 PM. Sunday is 12:00 PM to 2:00 PM. You don't need to have an agent or even reach out to us. If you want to go, just visit at the open house, or again, you can go look up the podcast, click a button and get a showing that's private where you're not going to have a ton of people walking through. Look at it. We have video, we have drone photography, videography. As Tom mentioned. It's a beautiful house. He checked it out on social media already.

Tom Whalen:

Well I look at all your stuff.

Jay Day:

Yeah. So thanks for tuning in. I'm Jay.

Tom Whalen:

I'm Tom. Jay Day and the Day Home Team at LPT Realty Weekly Real Estate Podcast. We'll be back again next Friday. Thank you for listening to all your friends, all about it.

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