Lower rates are good news for prospective buyers in the region
GLENWOOD SPRINGS, Colo. Even though the Roaring Fork and Colorado River valleys’ housing market marches to a different beat than the rest of the nation, it’s still on the same page when it comes to home loans and interest rates.Lower interest rates, established by the Fed last week, could have some positive effects for prospective buyers or homeowners looking to refinance here in the valley known for ever-increasing property values.”When the rates are lowered, basically, the same payment will get you more house,” said Bill Dillon of Family Home Loans in Glenwood Springs. “It’s favorable in our area because of the high property values.”The federal funds rate was lowered to 4.75 from 5.25 on Sept. 17, the lowest it’s been since May 2006. Those rates are what banks are charged for doing business on overnight loans. Borrowers receive a “prime” rate for loans, which is typically the fed rate plus 3 percent. Lowering the rate makes it less expensive for lenders to do business, according to Dillon, and it allowed lenders to stay “afloat” during the recent lending restructuring practices. But it also helps prospective buyers get into the market.”(Feds) do it to stimulate lending,” Dillon said. “The Fed moves the rates to free up a lot of liquidity in the market.”Currently, with the lower rates, Dillon said it’s a good time for prospective home buyers to get into the market in the Roaring Fork Valley because of the strong appreciation trends seen here.”It still makes it a solid investment,” Dillon said. “Getting in the game now, if you can qualify, you will start to build some equity even with an interest-only loan.”With strong appreciation, Dillon said people buying a home now at the lower rate – if they can qualify for a loan with the stricter lending requirements – would still benefit in a couple of years because of the increased land value. When the interest rates increase again, even with an adjustable rate, the homeowner would be able to refinance to an 80 percent loan, lowering their monthly payments.”(When the rates increase) even a half-percent higher rate is going to be offset by the appreciation that they realize in just a couple of years,” Dillon said.Changes in the lending practices have made it more difficult for prospective buyers to qualify for a loan. More and more lenders are looking for higher credit scores and more money down. Lenders are also more likely to lend 80 or 90 percent – loan-to-property value – rather than the 100 percent loans that have been popular over the last five years.”The loans that are being written now are better loans,” Dillon said. “It’s a return to more conservative lending practices, like prior to the lending boom of 2001.”But again, the high property values have the biggest impact on home loans in the valley, because anything greater than $417,000 is considered a “Jumbo” loan that comes with a higher interest rate anyway. However with today’s lower rates, a borrower could get into the market, refinance in a couple of years and with the appreciation of the home value still could possibly come away with a lower monthly payment.Contact John Gardner: firstname.lastname@example.orgPost Independent, Glenwood Springs, Colorado CO
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