The Golden Oldies: Interest Rates

You remember that nice couple just a few years ago that wanted to buy home but their lender declined them? Did they tell you the lender said they just didn’t yet make enough money to qualify for the type of home they wanted and decided to wait until they earned more? Sure you do, everyone has someone in their client list that wanted to buy but couldn’t. But if you look back and review some of those leads back in 2008 through 2010 you might find they can qualify today after all.

It’s all because of interest rates, not because of any new loan program.

For example, say that a couple makes $8,000 per month and they applied for a mortgage preapproval five years ago and gave up when they couldn’t qualify for the amount they wanted. Five years ago when 30 year rates touched 7.00 percent, someone making $8,000 per month could qualify for a mortgage around $350,000 with 20 percent down.

If the neighborhood where they wanted to buy had homes for sale around $650,000 in 2008, they couldn’t qualify for a conventional loan. But with today’s rates at 3.50 percent, they can, just because rates have fallen.

What about those who wanted to buy but couldn’t four years ago? If they put down 20 percent they could qualify for a $500,000 home.  Three years ago when rates were closer to 5.00 percent? The qualifying loan amount is $450,000 with a sales price of $560,000.

When interest rates fall it doesn’t just mean that borrower’s mortgage payments are lower it also means that more people can now afford to buy a home. So go back to your old-fashioned Rolodex or print off a lead sheet and contact those old clients. You can bet they’ll be happy to hear what you have to tell them!


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