Interest rates are rising, what does that really mean to you?

So 6 months ago you decided to finally become a homeowner or to downsize or upsize your current home and you made the wise decision to start the process by getting pre-approved for a loan. You've been pre-approved for a loan to buy your future home in Los Angeles, may it be a condo in Santa Monica or a house in Beverly Hills and that's great! But guess what? the interest rates that you were pre-approved with 6 months ago (maybe around 4%) are no longer today's going rates...A conventional loan today is around 4.85%. So what does that .85% increase difference mean to you and how will it impact your mortgage payments and your loan approval?

Well let's take a quick and simplistic look at the numbers:

If you were going to buy $1M property in Los Angeles with 20% down:

6 months ago Today (Oct 16 2018)

Purchase price: $1,000,000 same

Down payment: $ 200,000 same

Loan amount: $ 800,000 same

Interest rate: 4% 4.85%

Mortg pym/mo: $ 3,819 $4,221

Mortgage payment increase: $402/month or $4,824/year

What does this increase mean for you? besides the obvious...

#1 If you were pre-approved for a purchase loan several months ago, you should revisit your mortgage broker or your bank and get an updated pre-approval, especially if your income is still the same (has not increased) or if it has gone down (if you're self-employed or if one of the 2 spouses is not currently employed).

#2 As long as the economy continues to do well and un-employment remains low, the interest rates are rising and they're going to continue to rise. So, if you have been procrastinated or taking your sweet little time to buy a house in the San Fernando Valley or to buy a condo in West Hollywood, the longer you wait and the higher your monthly payments will be in the future.

Sure, there is a buzz on the street that the real estate market is currently slowing down and it is true but home prices in Culver City or Hancock Park or Condominiums in Brentwood are NOT CRASHING they are simply not increasing at the same rate anymore, but prices are still increasing, just at a slower pace and I believe they will continue to go up into the next year.