Thursday, October 18, 2007

A Prediction About Interest Rates

In the not too distant future, 30-45 days, I can see the credit meltdown having some positive effects on those of us who will still be in business. The major effect I see is that home mortgage interest rates will decline. Some say this started yesterday. Why? Supply & demand. The companies that lend money have not been lending money. They scared all the regular folks out of the process with all the news stories. The mortgage companies have been focused on the current performance ratios of their loans and properties they might or might not get back, and frankly, cleaning up their own messes from the past.

However, what should be happening soon is that the mortgage companies will realize that their income and profitability has also been affected by not originating as many loans or giving new mortgages to buyers. That will cause us to see them attempting to draw people into the market by lowering mortgage interest rates. That is good news for the buying public and I expect even more as this is a normal and seasonal thing as well due to a large amount of money being dedicated to consumer (holiday) spending. This year I believe the money supply will lower rates and that will translate into great rates for all well qualified buyers and investors. So get cracking now and get a property under contract to close before Thanksgiving.

What does it take?
Loans are still plentiful for the buyer who has good credit (650 FICO or better) has a job or verifiable income, and has a down payment of 10-20% plus. A loan can even be gotten for those with little to no down, if credit and income can be verified.

Investors should be jumping on this!
But here is the real point: There is an opportunity here for a savvy investor to buy low and sell high later. There are some markets that have taken a 5% decrease in the last 6 months in metro Denver for no reason other than over supply. Add that 5% decrease to a very motivated seller pool and 20% down payment and you are in cash flow heaven! One more item, rents are going up in Denver!

So the next question is "At what Interest Rate for an Investor?" I asked four of my best lenders that very question and all of them said similar things today:

10% down payment 7.125% with 1% origination.
20% down payment 6.75% with 1% origination.
25% down payment 6.625% with 1% origination.

Once again cash is KING. Even if you have savings in an IRA there are ways to make it work for you in the real estate world. So make sure we talk before you invest in the stock market. Real estate is REAL property!

So, if this kind of service could be valuable to you or your friends, put my 22 years of experience to work for you, learning about your new home town! Whether it is Highlands Ranch, Lone Tree, Littleton, Castle Rock, Centennial, Englewood, Parker, Elizabeth, Larkspur, Franktown, Kiowa, or anywhere in metro Denver Colorado, we offer real estate advice, properties for sale, multiple listing service, property listings, mls, all available at Drop me a note to

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