Unless you’re buying with cash, a cheaper home doesn’t always mean more affordable

Mike Miles of Fountain Mortgage walks you through the mortgage process.

By Mike Miles

If you’ve recently considered buying a home, you already know that. Buyers are stress.

With high real estate values, low inventory, and fierce competition, I heard more and more buyers saying they were going to “wait for house prices to come down.” It’s an understandable strategy.

But the problem is that most people don’t understand that even if house prices go down, it doesn’t necessarily make buying more affordable. Let’s say house prices drop 10% – quite a significant drop – but interest rates return to where they were about a year ago… how would that affect the monthly payment?

Let’s take a look:

Loan amount of $200,000
Rate of 2.75% on a 30-year fixed rate
= $816/month (excluding PMI, taxes and insurance)

Now let’s lower the house price by 10% and adjust the interest rate to January 2019 levels.

Loan amount of $180,000
Rate of 4.00% on a 30-year fixed term
= $859/month (excluding PMI, taxes and insurance)

That cheaper house just got more expensive.

So. To to wait or not to wait? Interest rates can be volatile. This can mean either a risk or sometimes a reward. But how much? Well, I’m glad you asked. Click here for an easy way to find out.

Want to run scenarios? Call me or my team.

This weekly sponsored column is written by Mike Miles of Fountain Mortgage. Located in Prairie Village, Fountain Mortgage is dedicated to educating, and therefore empowering, clients to make the best possible financial decision for their situation. Contact Fontaine today.

Mike Miles NMLS ID: 265927; Fountain Mortgage NMLS: 1138268

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