Richard's Real Estate Thoughts: Impact of lower rates for your home purchase in Chattanooga, Tennessee, or Georgia

Impact of lower rates for your home purchase in Chattanooga, Tennessee, or Georgia.

If you want to purchase a new home in the Chattanooga and North Georgia market,  the currently low interest rates can boost your home purchase options.  Rates continued to move even lower last week, especially after the Federal Reserve release suggested that the economic recovery was moving slowly enough that additional stimulus might be needed.

With these historically low interest rates combining with generally low home prices, home affordability makes for a great value in the Chattanooga area market for today's home buyers, whether you are a first time home buyer or moving to a larger home or downsizing.

Much of the media has focused on the loss of programs and the number of potential buyers who are no longer qualified. These problems do exist, but for the qualified buyer, there may never be a better time to buy your home.

Much as with mortgage refinancing, low interest rates give you, the home buyer, many options to plan your home purchase in terms your overall lifetime financial goals. In the past the marketed idea was to buy a home and let its appreciation create wealth for you. The payment did not matter, only appreciation in real estate values.

There are some inherent problems with that approach, as has become obvious to all.

Payment and debt liquidation do matter, and with these low interest rates you now today have multiple choices to plan your payment and your goal of House Payment Freedom.<

•1.       Buy more house

Using the interest of 6%/6.259% APR that was the average for 2008, a $1000 principal and interest (P/I) payment would pay for a fully amortized loan of $166,790. With a 5% down payment your home purchase price would be $175,600.

Using that same P&I payment of $1000, with today's 4.25%/4.579% APR interest, you could have a loan amount of $203,275. Adding a 5% down payment you could purchase a home priced at $214, 975.

You could buy over $48,000 more home, plus in today's reduced market each home price dollar buys more home.

•2.       Have a low payment for monthly savings or for other budget items

Using that same, purchase price which would have a $1000 payment with a 6% interest rate loan, from the above example, you could buy that same $175,600 priced home.

Only now, with the 4.25%/4.579%APR interest rate your home payment would be $820.51. You would have the same home, but not the same payment. You would save $180 each month, or over $2000 each year.

What would you do with $2000 more income? Save. Improve the home. Vacation. College plans. Pay your new home loan down quicker.

It would be your money, you decide.

•3.       Reduce the term of your loan when you purchase

Similar to option 2 but with a better interest rate, you could purchase the same price home that $1000 monthly would buy at 6% note rate, but finance the home purchase mortgage at today's low interest rates. Using a 15 year mortgage rate of 3.875%, that same $166,790 loan amount would have a 15 year payment of $1223.31 - just a little over $200 more each month and you same 15 years of house payment.

Wow. House payment free in 15 years. Now you need to decide what to do with 15 years of house payments you would not need to pay to the bank.

It would be your money, you would decide.

If you are looking for a home to purchase in the Chattanooga, Tennessee, or Georgia markets, you can start your home search here with some featured homes or here with a more general home search to see price ranges and a sampling of homes available in the market. Then contact a real esate agent to help you with a more thorough search and contract negotiation.

FHA, VA, Rural Development, Conventional, Jumbo,
Reverse Mortgages, FHA 203k Renovation

Home financing in Tennessee and Georgia.

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