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Mortgage Rates and Affordability of Fredericksburg TX Homes

Posted in: Mortgage News/Sources
By SAGE - Premium Texas Real Estate
Feb 4, 2015 - 7:58:08 PM

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Residential mortgage rates impact the sales of Fredericksburg TX homes in Gillespie County, as they do in communities throughout the nation.  Most buyers do not pay cash.  They need to qualify for home loans and come up with money for down payments and fees.

The interest rates can make all the difference in the costs of buying real property.  Buyers - both first-time and repeating buyers - rely heavily on the 15-year and 30-year fixed rate mortgages and other mortgage products to buy their homes.  

Interest rates were in double digits in the 1970s.  During that time, sellers had to lower the prices of their properties so that buyers could afford the payments.  When interest rates are low, as they have been for the past several years, then a couple of scenarios are prevalent:

  1. Buyers can arrange lower monthly payments.
  2. Buyers can purchase larger, more expensive homes.

Interest rates have remained at unbelievably low levels for many years.  The 30-year fixed-rate mortgage has been hovering between 3.5 and 4.5 percent.  This low interest rate has promoted the sales of homes.  Either way, low interest rates are 1 great incentive for homebuyers in the Fredericksburg TX homes market.

What causes Changes in Interest Rates?

Mark G. Dotzour explains Mortgage Markets in his article entitled “Heart of the Housing Market published in Tierra Grande (January 2015): Journal of the Real Estate Center at Texas A&M University.  He outlines the factors that influence rates in an effort to help real estate professionals and buyers understand mortgage rate trends.

"The 30-year, fixed-rate mortgage rate moves closely in tandem with the ten-year U.S.  Treasury bond rate....When the interest rate on the ten-year Treasury bond goes up 1 percent, it's highly likely that the interest rate on all other bonds will increase by nearly the same amount."  And vice a versa.  Mortgage rates are always higher than the Treasury rate because mortgages are perceived to be riskier Dotzour explains, "the 30-year mortgage rate is likely to be about 1.8 percent higher than the current ten-year Treasury rate."

The treasury rate goes up or down depending on expected inflation.  No one wants to see the "runaway inflation of the late 1970s."  Policies adopted by the Federal Reserve have kept inflation in check.

Many homebuyers find it challenging to come up with a 20 percent down payment.  A 20 percent down payment on a $300,000 home would be $60,000.  Let us say a buyer mortgaged the remainder with a $240,000 loan.  As we have discussed before, a $240,000 loan with 4 percent interest rates is an entirely different scenario then a $240,000 loan with a 15 percent interest rate.

Sage Premium Texas Real Estate

For more information about Fredericksburg TX homes for sale, including estate home tracts, large tracts, ranches, and Texas Hill Country real estate, please contact Dale Cook of Sage Premium Texas Real Estate in Fredericksburg at 830-997-1035.

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Dale E. Cook, MBA, Broker/Owner

Sage - Premium Texas Real Estate
405 N. Llano St.
Fredericksburg, TX 78624

830-997-1035 office
830-992-0056 cell

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