Damn, You're Young...

By
Mortgage and Lending with Mortgage Financial Group, Inc

I am stealing that line from Neil Cavuto of Fox Business Network

In a recent broadcast of Fox News, Cavuto mentioned how someone asked him about mortgage rates. The person was hesitant to buy a new house because mortgage rates went back up. Cavuto asked him what he was going to do... wait to see if they go back down was the response.

Cavuto, in his off tangent thinking, begins to share how "Damn" young this guy is. But his answer to the potential home buyer was "5.25% is pretty good." Then he proceeded to tell the young man to "Shut up."

Why did Cavuto tell him to shut up? The answer is pretty simple. "5.25% is pretty good." Remember when mortgage rates were double digits. Remember when prime was over 20%. Remember when...

Most people, if they think hard enough, will remember those days. Now, doesn't 5.25% or even 5.75% sound "pretty good." Yes, it does. And yes, 4.75% sounds better. Unfortunately, those days are in the past, and soon you will be saying I remember when rates were 4.75%. For those of you who waited to see if rates would go any lower, are now going to say, I remember when rates were 4.75%, but all I got was a 5.75% rate. But you know what? That is still "pretty good" compared to what it could be.

So what is the moral of this story? It is shut up about the rates. They are going to be what they are. It is only a matter of how long does a borrower want to wait to lock in their rate. 4.75% is gone. 5%+ is in. It is still a "pretty good" rate.

Oh, and to put this into monetary terms, a $150,000 mortgage at 4.5% over 30 years has a payment of $706. The same mortgage at 5.25% has a payment of $828. That is roughly $36 per .25% increase to the rate. That breaks down to just over $1 per day per .25% increase to the rate. Can you afford an extra $1 per day to go to your mortgage if rates went up .25% tomorrow. If the answer is "No," then you need to do something today. If the answer is "Yes," then can you afford a full 1% increase (or $4/day)?

Each day you spend watching the rates go up is just another dollar that you could have been saving.

If you want to watch the Cavuto news clip, click here.

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Show All Comments
Rainmaker
152,652
Margaret Mitchell
Coldwell Banker Yorke Realty - York, ME
Seacoast Maine & NH Real Estate

I wasn't in real estate then but I remember the 18% mortgages.  It came along with gas lines.  I was in college and remember thinking how unfair it was that the world was in financial ruin right as I was starting out.  We have come full circle.  And 5+% is fabulous.

Jun 10, 2009 05:43 AM #53
Anonymous
Anonymous
Anonymous

First time home buyers, especially, wait and wait and wait to get the 'best deal' and usually end up losing out because they are not getting the professional guidance and advice they need.  Then again some first time home buyers think they know it all and just don't listen.  It's nice to see the numbers put into a different perspective, thanks for the post!

Jun 10, 2009 07:03 AM #55
Rainmaker
291,273
Darrell Walters
W. Darrell Walters - Newnan, GA

Go online and look at Freddie Mac's rate comparison for the past 30+ years. Rates are still very low and now is still the time to take advantage of them!

Jun 10, 2009 07:46 AM #56
Rainmaker
208,702
Marney Kirk
Keller Williams Excellence Realty - Towson, MD
Towson, Maryland Real Estate

Jason, you are right. When I started I was so happy for a client to get under 9%!!!

Jun 10, 2009 07:56 AM #57
Anonymous
Anonymous
Jim Costello

I can understand your frustration with borrowers who are not satisfied with 5% rates when they think they can and should get a 4% rate.  I just had a borrower miss out on 4.875% because she wanted to hold out for 4.75%.  Of course rates are almost a full point above that in only a matter of 2 weeks time.  Greed sets in and not being satisfied with the current conditions.  Unfortunately, it is human nature.  Sometimes us originators have to be part time psychologists to convince our clients that today is the day to act.
Easier to say than to do.

Jun 10, 2009 08:13 AM #58
Anonymous
Anonymous
Danell Merren

Well said! People's expectations re: rates are so ridiculous at this point. It's like, you really think 5.5 is bad?!

Jun 10, 2009 08:48 AM #59
Ambassador
1,555,844
Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 800-610-7253 DRE01267479 - Costa M

When we bought our home several years ago, we were excited with 8.375%. 

I like the way you've broken down the numbers.

Jun 10, 2009 08:50 AM #60
Ambassador
417,710
Joe Pryor
The Virtual Real Estate Team - Oklahoma City, OK
REALTORĀ® - Oklahoma Investment Properties

The only thing that would make the Cavuto interview really appealing would be for the young person to slap him as he deserved for being a rude. Can you imagine what would happen if you said this to your young client? 

Jun 10, 2009 09:07 AM #61
Rainer
148,171
Marc Blasi
Boca Executive Realty - Palm Beach Gardens, FL
Marc Blasi -Country Club and Waterfront Properties

I have to laugh at the people who were offended at Cauvto's supposed rudeness!  They completely missed the point.

The clip was dead on and if more people were that blunt we'd be in a much better position right now.

Oh, yeah - I almost forgot the gratuitous AR "Great post!" for points!

Jun 10, 2009 10:02 AM #62
Rainer
38,297
Harold Smith
Berkshire Hathaway Homeservices - Acworth, GA

I paid 8% interest on my present home loan in 1987 and was damn happy to get locked in at that rate. By the way I like Neil Cavuto. But thats just me, different strokes.

Jun 10, 2009 10:03 AM #63
Rainer
10,002
Lois Merrithew
Lloyd & Day Real Estate - Tamworth, NH

Buyers definitely should not wait for rates to go back down.  I don't believe that many of us will ever see such low rates again.  Anything under 10% will someday be considered low.

Jun 10, 2009 10:18 AM #64
Rainmaker
1,257,595
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

You are so right.  This is the best time to buy.  The higher rates are coming soon.

Jun 10, 2009 10:20 AM #65
Rainer
95,645
Jason Price
Mortgage Financial Group, Inc - Eustis, FL

i just want to say thank you to everyone who has commented on this post.  Whether you agree with Covuto's way of handling the situation or not, we all seem to agree that rates are still good despite them being higher then they were two weeks ago.  And now is still a great time to buy...

Jun 10, 2009 10:38 AM #66
Rainmaker
509,595
Patricia Aulson
BERKSHIRE HATHAWAY HOME SERVICES Verani Realty NH Real Estate - Exeter, NH
Realtor - Portsmouth NH Homes-Hampton NH Homes

Yes, compared the years ago the rates are "very reasonable" and it's how you look at it.

Patricia Aulson/Portsmouth Nh Real Estate

Jun 10, 2009 11:23 AM #67
Rainer
9,903
Bradley Gill
Eagle Financial & Properties Group - San Jose, CA
Broker

Great thought provoking post - personally from a younger person's perspective (29 years old), not only have we not really witnessed or seen interest rates in the double digit range (last time was 1990), our generation probably doesn't even understand the importnace of having a 30 year fixed mortgage when compared to a more aggressive ARM offered just a few years ago.

Unfortunately there is a huge lack of mortgage, let alone borrowing, education in our school systems. I think the only education I received in high school related to personal finance was how to balance my check book - then in college the only personal finance we ever saw was an onsluaght of credit card companys trying to push numerous credit cards down your throat in exchange for a myrad of coupons or t-shirts. Great lesson by the credit card companies - how much debt can we get college students to ring up (whom most don't work) before they graduate!

I think that the professionals in our industry just have to keep reminding buyers about how unbelieveable the opportunity is to buy right now - rather than be fixated on interest rates - remind them to consider where house prices are right now. If they can qualify to purchase and the payments are affordable then they should purchase rather than wating another few months for rates to fall down again (which is an uncertain event) all the while the home prices are beginning to climb, especially in the first time homebuyer price range.

Jun 10, 2009 12:59 PM #68
Rainmaker
263,495
Kim Daugherty
www.RealFamilyRealEstate.com - McKinney, TX
d + b real estate, McKinney, TX REALTOR Broker/Owner

Jason - very timely reminder. We get greedy when we see these low rates and take for granted that they will be around forever. Cavuto has a way with words doesn't he?

Jun 10, 2009 03:42 PM #69
Ambassador
499,975
Donna Bigda
RE/MAX Alliance - Branford, CT
Greater New Haven CT Real Estate

Jason - You hit the nail on the head with this post.  Congrats on the feature!  This is a great read for any buyer who is out there still sitting on the fence.

Jun 10, 2009 09:02 PM #70
Rainmaker
197,630
Mark Velasco
Realty Source, Inc (Luxury Homes Division) - Whittier, CA
Friendly Hills Homes for Sale - Whittier, Ca. Real Estate - Listings

Well said Jason. People don't realize how low (historically) the rates are right now.

Jun 11, 2009 09:29 PM #71
Rainer
34,550
Kenneth Young
Uni International LLC - Virginia Beach, VA

Looking at the posts, alot of us remember the high interest rates.   Me, 1981 first house, VA approved, $10,000 down....interest rate:  12.5%

Jun 13, 2009 01:33 PM #72
Rainmaker
973,908
Sharon Alters
Coldwell Banker Vanguard Realty - Fleming Island, FL
Your Fleming Island Relocation Agents.

Jason, we were thrilled when we bought our first home and it was 7%. People are spoiled today by the last few years of low rates. Better take advantage of the rates we have now because they aren't going to stay here.

Sharon

Jul 04, 2009 12:17 PM #73
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Rainer
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Jason Price

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