It’s time to revisit the pre-approval amount that you qualified for your mortgage application, if that was done more than 2 weeks back. The biggest reason – the mortgage rates have spiked by ~.75% in just over 4 weeks.
Last week Freddie Mac released the results of its Primary Mortgage Market Survey, which found that both fixed- and short-term mortgage rates continued to rise. This was the fifth week in a row where fixed-rate mortgage rates were up.
30-year fixed-rate mortgage averaged 4.83 percent with an average 0.7 point for the week ending December 16, 2010, up from week of Nov 11, 2010 when it averaged 4.17 percent. 15-year fixed-rate mortgage last week averaged 4.17 percent with an average 0.7 point, up from week of Nov 11, 2010 when it averaged 3.57 percent. 5-year adjustable-rate mortgage (ARM) averaged 3.77 percent last week, with an average 0.7 point, up from week of Nov 11, 2010 when it averaged 3.25 percent.
Ceteris paribus (Latin for everything else remaining the same), if you qualified for a loan amount of $400,000 (assuming a purchase price of $500,000 and 20% down payment) on Nov 11, 2010 at 4.17% rate, based on today’s rate you will only qualify for a loan amount of $376,800 (that’s a purchase price of $471,000 with 20% down payment. In essence – that’s a whopping $29,000 reduction in purchase price in just over 4 weeks.
Whether you are a real estate agent working with “pre-approved” buyers or someone looking to buy a home, make sure you consult with your loan officer again to get an updated pre-approval. The last thing you would want is to get into contract on a home only to realize that you do not qualify for the mortgage any more.
If you are looking to buy somewhere in California, I offer free consultations and pre-approvals. Call me at 408.615.0655 or email me at [email protected]
You may also like to read – Mortgage Rates Trends and Predictions