Latest / Connor with Honor: AI, Real Estate and Real Life / If rates drop how much will your payment be on a 1 million dollar house?

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If rates drop how much will your payment be on a 1 million dollar house? · Connor with Honor: AI, Real Estate and Real Life

• 0:00
  SPEAKER_00: We're going to do a couple different things, but first we're going to start with today being Friday the 13th, 2024.
• 0:05
  SPEAKER_00: Good day, everybody.
• 0:06
  SPEAKER_00: I'm Connor with Honor.
• 0:08
  SPEAKER_00: I did want to talk about two things.
• 0:10
  SPEAKER_00: First off, if interest rates do come down this next week, what can you expect as far as change in payment?
• 0:18
  SPEAKER_00: Now, right now, I don't know where your current interest rate happens to be.
• 0:22
  SPEAKER_00: I don't know how great your credit is.
• 0:23
  SPEAKER_00: In some cases, if you happen to be a real estate buyer, maybe your credit's absolutely stellar.
• 0:29
  SPEAKER_00: And in fact, you're probably getting the best rate there is.
• 0:32
  SPEAKER_00: Now, in some cases, that's why it sometimes is a good idea for Ulist at least to check with an additional source, because let's say you have really pristine credit and everything's lining up perfectly, and then at this time you choose to get a uh to get a loan for a house, and then the lender tells you, great, this is going to be your interest rate.
• 0:54
  SPEAKER_00: It's a spectacular.
• 0:56
  SPEAKER_00: It wouldn't be a bad idea, especially if the rate they're telling you seems to vary or be somewhat different than maybe something somebody's told you, you've seen online, just to get a second opinion.
• 1:08
  SPEAKER_00: But without having to give up all your personal and private information, maybe just a more of a soft inquiry would make sense.
• 1:17
  SPEAKER_00: But at the end of the day, it's not a bad idea.
• 1:20
  SPEAKER_00: The same thing as you might as you might shop around for a real estate agent, same thing on the lending end.
• 1:26
  SPEAKER_00: But I wanted to look at what the actual cost is for a loan of the current interest rates around seven, and then if the interest rates drop down at four, what the change in that payment looks like.
• 1:39
  SPEAKER_00: And then on your end of it, you can of course follow up with your lender, but at least this will give us a good idea.
• 1:45
  SPEAKER_00: In Santa Clarita Valley, the median or average average sales price is somewhere around$900,000.
• 1:52
  SPEAKER_00: Usually, that of course, that's going to always be single family residence, at least currently, in that price range.
• 1:59
  SPEAKER_00: And that's basically the average currently as we have September.
• 2:03
  SPEAKER_00: We're in September 2024.
• 2:05
  SPEAKER_00: Let's have a look here.
• 2:06
  SPEAKER_00: I'm at my website, Santa Crita Openhouses.com.
• 2:09
  SPEAKER_00: We'll just have a look here and see if uh we're lucky enough to find a million-dollar piece of property to have a look at.
• 2:15
  SPEAKER_00: Here's one here.
• 2:16
  SPEAKER_00: This one's priced at a million.
• 2:18
  SPEAKER_00: We're gonna get down here to the calculator that I have put together, and I think this will give us an idea.
• 2:24
  SPEAKER_00: So this house, if somebody were to put 20% down, and the home price is about a million dollars.
• 2:31
  SPEAKER_00: In fact, you know what we're gonna make it a million dollars just to make it different.
• 2:36
  SPEAKER_00: And then your down payment is gonna depend on what you've talked with your lender about.
• 2:42
  SPEAKER_00: And there's various things that are included in this.
• 2:45
  SPEAKER_00: If you happen to, if you're going to get a loan with FHA, Federal Housing Administration, a government type loan, could pretty much buy this property for 3.5% down.
• 2:57
  SPEAKER_00: So that would be you have the million, so you're at$35,000, of course.
• 3:03
  SPEAKER_00: So if you were to do that,$35,000, you would then have this particular payment.
• 3:10
  SPEAKER_00: And this calculator did adjust for property mortgage insurance.
• 3:14
  SPEAKER_00: Now these are all estimates.
• 3:16
  SPEAKER_00: It very much depends on your ability to finance interest rate, finance real estate and how your credit profile looks with your lender.
• 3:25
  SPEAKER_00: They're gonna pull everything and they're gonna get your credit report, they're gonna get all those other items from you.
• 3:31
  SPEAKER_00: My suggestion is make a folder on your computer somewhere, somewhere that you have access, and put all of these documents that the lender's gonna ask for, have them uh put into a file so you have easy access.
• 3:44
  SPEAKER_00: The reason being is in the future, let's say you do you want to get this second opinion thing I mentioned, then it's easy because you can then just take that file, zip it, or just send it over to the next lender that you would like to talk with to have them verify the first lender.
• 4:02
  SPEAKER_00: Some people are going to tell you, oh my gosh, bad suggestion from Connor, because if you have your credit ran multiple times, there's gonna be an issue with impact on your FICO score.
• 4:13
  SPEAKER_00: Folks, we're in 2024.
• 4:15
  SPEAKER_00: If in fact you go to one lender and you don't like them, but they've already gotten all your information, ran all your credit, and you go to a different lender, dollars to donuts, there's probably a mechanism that's gonna be able to repair your credit if it's damaged by multiple inquiries.
• 4:32
  SPEAKER_00: Now, that's not to say if you go and they have a mortgage person run it, and we're in escrow, and then you go and you have a Chevy dealer run it, then a Mercedes dealer run it, then a BMW, there's gonna be potentially a problem that might not be able to be repaired.
• 4:49
  SPEAKER_00: But mortgage lender to mortgage lender, okay, and I would also ask that question to the second lender if I give you all my financial information and you run my credit, is that going to damage me and cause a bigger issue or more of a problem with me being able to borrow money because I just had this other cat run it that I don't really care for, and I just don't want this to impact me.
• 5:14
  SPEAKER_00: And they say, Connor, don't even worry about it.
• 5:17
  SPEAKER_00: Just like fried gold, it's gonna be perfect.
• 5:20
  SPEAKER_00: Then the problem is, is they just told you that verbally.
• 5:23
  SPEAKER_00: Get it in writing.
• 5:24
  SPEAKER_00: So then you follow up with an email.
• 5:26
  SPEAKER_00: Hey, Jack, it's Connor.
• 5:28
  SPEAKER_00: Thank you so much for the information today.
• 5:30
  SPEAKER_00: I just wanted to make sure I understood you correctly.
• 5:32
  SPEAKER_00: You running my credit isn't going to harm it because the other lender just ran it last week and gave me his estimate on a loan.
• 5:41
  SPEAKER_00: Now I want your estimate.
• 5:42
  SPEAKER_00: You running it again isn't going to impact it by what you said.
• 5:47
  SPEAKER_00: Did I understand correctly?
• 5:48
  SPEAKER_00: And just let it go and see what happens after that.
• 5:51
  SPEAKER_00: But at least you have accountability.
• 5:53
  SPEAKER_00: So looking at this here, estimated monthly payment, you have a million-dollar home price.
• 5:59
  SPEAKER_00: As far as what's happening with the loan, you're going to put, we're going to do the 20% down, of course.
• 6:05
  SPEAKER_00: So let's look at what that number is.
• 6:08
  SPEAKER_00: So a 20% down,$200,000, this is a 30-year fixed loan, and your princip you notice that there is no more property mortgage insurance.
• 6:18
  SPEAKER_00: Usually you go less than 20% down, even conventional.
• 6:22
  SPEAKER_00: And this is going to depend on if you had some major great PM Pri America or PMI account, some nice financial account with a match a large brokerage firm, then these numbers are going to be a lot different from you because you're going to be brought in and basically given the icing on the cake type of treatment.
• 6:41
  SPEAKER_00: You're going to get all the fancies.
• 6:44
  SPEAKER_00: With just us normal folks out there, this is probably going to be pretty true to form, but it's also going to depend on your own personal credit profile as to where these numbers are.
• 7:01
  SPEAKER_00: Let's go to seven.
• 7:02
  SPEAKER_00: So that's kind of given us an idea.
• 7:04
  SPEAKER_00: Those interest rates are.
• 7:05
  SPEAKER_00: And here we have home insurance.
• 7:08
  SPEAKER_00: This is going to be if this is paid every month, but a lot of times your insurance and your taxes with 20% down are going to be paid by you.
• 7:20
  SPEAKER_00: Home insurance once a year or maybe monthly.
• 7:24
  SPEAKER_00: Property tax could be every six months or yearly, just depending on how you want to do it.
• 7:31
  SPEAKER_00: But these are extra payments you're going to pay.
• 7:34
  SPEAKER_00: And this here,$5.91 on a million dollars, isn't per year, that's per month in California.
• 7:41
  SPEAKER_00: So you break that down.
• 7:42
  SPEAKER_00: Usually Los Angeles County carries the property tax of about 1.25%.
• 7:48
  SPEAKER_00: That's going to fluctuate.
• 7:50
  SPEAKER_00: If you have an area like Santa Clarita or Simi Valley or different areas that carry Melowrus tax, it's an additional tax on residential real estate that the builder didn't pay at the beginning.
• 8:01
  SPEAKER_00: Then you're going to be running into even higher numbers for property tax.
• 8:05
  SPEAKER_00: And in some cases, it's considerably higher.
• 8:09
  SPEAKER_00: Make sure that you as a real estate buyer know what you're getting into.
• 8:12
  SPEAKER_00: Usually those mellow rus are known pretty quickly up front.
• 8:17
  SPEAKER_00: I would hate it for be the case to be the case that yield estate buyer would be approaching residential real estate.
• 8:25
  SPEAKER_00: You very much like what you see.
• 8:27
  SPEAKER_00: You maybe write that offer, you talk about the finances, and then all of a sudden, somewhere in the process, you discover the extra Melaruz tax on the property.
• 8:37
  SPEAKER_00: In my mind, that's bad form.
• 8:40
  SPEAKER_00: That was a bad mistake made by the real estate representative that you've hired to represent you as a buyer on the residence.
• 8:47
  SPEAKER_00: You need to know this going in because that's going to be coming out of your pocket, well, monthly, twice a year, whatever.
• 8:54
  SPEAKER_00: But usually with 20% down, you're paying these fees out of your pocket by money that you saved.
• 9:00
  SPEAKER_00: Usually it's not included in your mortgage payment.
• 9:03
  SPEAKER_00: If you're going less than 20% down, then you'll see usually your closing costs are going to be a little bit more because they are going to include six months of taxes ahead of time and one year of home insurance ahead of time.
• 9:17
  SPEAKER_00: And the reason why this is done that way is for the simple fact that if you happen to not continue with your obligation of paying your bank the mortgage amount, you default on your mortgage, you say maybe something bad happened to you in life, or you've decided you can't continue with paying your making your house payment, you can't start any of these other things, so you stop.
• 9:41
  SPEAKER_00: This gives them at least six months to start some kind of proceeding, legal proceeding against you because property taxes are covered, and then they're covered for a year in the interest.
• 9:51
  SPEAKER_00: That's for usually less down, and I guess statistically, if you look at it, more than likely, people that put less down might default at a higher rate than people that put more down, just for the simple fact that when you put 20% down, usually in some cases you'll have enough to be able to actually sell the property right away, but again, it's going to dig into that 20% down of equity you have on the residents.
• 10:17
  SPEAKER_00: And that's also if you didn't pay too much for it or go too far too far above what that average price would be in that same neighborhood given the same circumstances.
• 10:28
  SPEAKER_00: It's important that you get those numbers.
• 10:31
  SPEAKER_00: All right, so we have a million dollars here.
• 10:33
  SPEAKER_00: This is where your payment's going to be at 7%.
• 10:36
  SPEAKER_00: If the rate drops to 6%, then you're going to be at$62.04 a month.
• 10:43
  SPEAKER_00: And then if the rate drops to 5%, it's not working.
• 10:47
  SPEAKER_00: Give me one second, I apologize.
• 10:49
  SPEAKER_00: Oh, there it is.
• 10:50
  SPEAKER_00: I apologize.
• 10:50
  SPEAKER_00: Let's go back and set this up one more time.
• 10:53
  SPEAKER_00: So we have the 7% interest rate and 62.04 a month.
• 10:59
  SPEAKER_00: Then let's say rates drop to somewhere in the sixes, and then we will be at 56.78.
• 11:07
  SPEAKER_00: And then if they drop further into the fives, 51.76.
• 11:12
  SPEAKER_00: So you can see how these prices change considerably when you start changing these numbers.
• 11:22
  SPEAKER_00: And again, you have the million dollars in real estate, you have a 20% down 30-year fixed, and also this is going to indicate there is no HOA, at least on the numbers we're putting together.
• 11:34
  SPEAKER_00: In cases, depending on the age of home in Santa Clorita, you're going to have a homeowner's fee here as well.
• 11:40
  SPEAKER_00: So let's see what happens if these rates drop to five.
• 11:44
  SPEAKER_00: And that's a million dollars, 20%.
• 11:45
  SPEAKER_00: So you're$5,176 a month for a million dollars in real estate financing$800,000.
• 11:52
  SPEAKER_00: Because you do the math, you have a million dollar home price, your down payments$200,000, so you're financing$800,000.
• 11:59
  SPEAKER_00: If rates drop to four or four and a half, we'll go four first, it changes considerably to$47.01.
• 12:07
  SPEAKER_00: And let's say rates drop to$4.5%.
• 12:10
  SPEAKER_00: And this just kind of gives us a gauge and an idea.
• 12:13
  SPEAKER_00: And then if it does, you're right, just below$500,$5,000 per month.
• 12:19
  SPEAKER_00: That's going to be an all-in payment, just principal and interest, remind you,$4,053 a month and 4.5%, 30-year fixed,$200,000 down, and that's a million dollar home price.
• 12:34
  SPEAKER_00: There are properties available at this.
• 12:36
  SPEAKER_00: You can find them all at Santa Clara Open Houses, but at least this way you get an idea if interest rates are cut, what's going to be happening to your ability to borrow.
• 12:46
  SPEAKER_00: My suggestion is at least if you haven't talked to your lender for a while, give them a call and say, listen, I'm still in the market.
• 12:54
  SPEAKER_00: I've just kind of been taking a little bit of a hiatus because of interest rates climbing by affordability and not seeing how real estate has made much of an adjustment as far as changing the prices.
• 13:06
  SPEAKER_00: We're not seeing that in the Santa Clarita Valley where prices are declining.
• 13:10
  SPEAKER_00: We are seeing it's taking just a smidgen longer.
• 13:14
  SPEAKER_00: So such a small amount, it's hard to tell if it's going to continue, but it is taking several days longer to get properties into escrow, depending on city property type, and also the pricing strategy, and also advertising and marketing strategy.
• 13:29
  SPEAKER_00: But we're watching this as uh we're seeing the market change somewhat.
• 13:33
  SPEAKER_00: We'll have to see what happens if next week, when the Fed meets, interest rates are going to be dropped.
• 13:38
  SPEAKER_00: I'm Connor McIver.
• 13:40
  SPEAKER_00: Thank you for checking out Santa ClitaOpenhouses.com, and I look forward to helping you when you're ready.
• 13:45
  SPEAKER_00: Be well, everybody.
• 13:46
  SPEAKER_00: Thanks for watching.
• 13:47
  SPEAKER_00: I'm Connor McIver, over and out.