The Carr Report

Buyin Power is Way Up!

Gina Carr,
Advantage Team Leader

In this case, the traditional loan is a 30-year loan with a fixed rate of 6.25% (no money down Par Rate). With the Interest Only, Zero Down loan, your payments are cut in half! The starting rate for this loan is 3.75% and it is a one-month adjustable loan based on the one-month LIBOR index (currently 1.42%).

One of the interesting things about this type of loan is that although you are not required to pay down the principle balance of your loan during the first 10 years of the mortgage, you can pay it down at any time if you wish. If you do pay it down, your next payment will then be based on the new lower principal balance.

"While this loan is not for everyone, it is a vehicle for financially astute people to manage their cash flow," explains Bill Bricka of Advantage Mortgage. "This works well for people that want to dramatically reduce their monthly cash obligations for a limited period of time."

This is similar in principle to leasing a car. The big difference here is that a car is a depreciating asset. A house is an appreciating asset. So although you may not be paying down your loan balance, you will still be building equity with your home's appreciation. In the Towne Lake area, home appreciation historically has been 3 - 5% per year.

If you look on page 87 and the back page of this month's TowneLaker, you will see payments quoted for this type of loan on homes that range from $155,000 with a payment of $484 per month to a home that is priced at $799,000 with a payment of only $2,500 per month.

And, don't worry if you're afraid that you haven't been in your current home long enough to break even on its sale. Lots of savvy home buyers are keeping their current homes and turning them into rental properties. It's no secret that real estate is a more attractive investment than the stock market these days.

As each individual's financial needs vary, it is important to speak with mortgage, financial, and tax specialists to see which programs are suited for your specific needs.

For more information on how you can afford your dream home today, call Gina Carr's Advantage Team at (770) 516-5700. Note that all rates quoted in this article were current Par Rates as of 12/18/02. All rates are subject to change. All borrowers must qualify based on credit, income and other underwriting criteria.

Visit us at ginacarr.com.

Buying Power in the real estate world is a term that describes the amount of home that a person is able to purchase. With today's interest rates at 41-year lows, Buying Power is at an all time high.

In simple terms, you can buy more house today than you could a year ago. In fact, your home buying power is probably about ten percent stronger today than it was one year ago. This is a result of the dramatic drop in interest rates. Rates have dropped a full percentage point from what they were a year ago. Let's look at an example.

xxxxxxxxxxxxxRate xxPayment xxLoan Amt
Jan 2002 xxxxx6.875xxx $1,866xxxxx $284,150
Jan 2003 xxxxx5.875xxx $1,866xxxxx $315,561
Increase xxxxxxxxxxxxxxxxxxxxxxxxxxxx$ 31,411

In other words, if you qualify for a principal and interest payment of $1,866, you can get a loan for up to $315,561 in January 2003. A year ago, you would only have been able to get a loan for $284,150, a $31,411 increase in buying power!

Let's look at it another way.

xxxxxxxxxxxxxRate xxPayment xxLoan Amt
Jan 2002 xxxxx6.875xxx $1,642xxxxx $250,000
Jan 2003 xxxxx5.875xxx $1,478xxxxx $250,000
Savings xxxxxxxxxxxxxxxx$ 164/mo. 

In this example, we show the difference in the amount of principal and interest payment for the same loan amount. A smart buyer would save $164 per month over the same loan of $250,000 from a year ago.

For those looking for shorter term mortgages, there are some unbelievable, relatively safe financing opportunities. After all, not everybody needs a 30-year fixed rate loan. Some people know that they aren't going to be in a particular home for very long. For those people, they might want to try interest only, zero-down loans. With these loans, a borrower can get a starting rate as low as 3.75% - with no points!

Let's look at an example of how this would work.

xxxxxxxxxxxxPurchase xDownxxxxxxxP&I
xxxxxxxxxxxxPrice xxxxxPmtxxRatexxPmt
Traditional xxx$300,000xx $0xx6.25%x $1,847
Interest Onlyx$300,000xx $0xx 3.75%xx$938