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Update on Home Construction Loan Interests Rates and Price Reductions in Middleton, Idaho

Current Interest Rates for Home Construction Loans and Real Estate Price Reductions

Hey, Brian Freeman here. Hey thanks again for joining us here on the Real Property show, we appreciate you listening. Today, I wanted to discuss interest rates and get you an update on what you can expect if you’re looking to get a construction loan to build a home, actually buy land and build a home this will apply to you too, and also what the interest rates are for your 30 year fixed rates if you’re getting ready to get a conforming loan for buying a resale home, the home that’s already existing, so I wanted to get you an update on that.

Home Construction Money for Conforming and Portfolio Loans

Right now we are actually seeing the construction money for construction loans, these are portfolio loans this is different from the conforming loans so different guidelines are behind them and we’re actually still seeing 4.375% rates and that’s based on zero points being paid, and a 60-day lock on the money. Once you get your lender package in and you submit that to the lender, you get approved and all your financials are good to go, they can actually lock that in for 60 days.

You typically want to have your appraisal done before that is accomplished or real close to having the appraiser show up so there’s not a delay in that time frame and you don’t run out of your 60 days. Right now they’re very competitive as far as looking at it in compared to resale, or when you’re buying a resale home and getting a 30-year commission on there.

Current Construction Loan Rates and Terms

We’re going to look at those rates here so again 4.375% with zero points that’s a Kinecta bank is doing that right now it’s actually a very good rate compared to what you’re seeing out there. That has changed now obviously, we have clients that we are building for currently right now and are getting ready to actually start their projects and that was they had locked their loans, they closed on these at the beginning of April, end of March and they actually closed at a point lower than that, so at 3.375%, they locked 60 days earlier so they actually were almost at the end of their lock. They were close, it put them back into February or January time frame for closing, and the rates have moved up a point since then.

Reviewing Fixed 30-Year and 15-Year Mortgages

I want to show you here, I’m going to share my screen with you, so if you’re listening to the podcast you can jump over to the Youtube channel where you can actually see what I’m showing here, but we’re going to talk through it so it should be pretty easy for you to follow on a podcast. Let me share my screen with you, I’m going to show you the actual rates today for 30 years fixed and the 15 years fixed mortgage as well.

Kinecta Bank Mortgage Rates

The first thing I’d like to show you is this is actually Kinecta bank, this is their home page, their mortgage rates here and I want to show you a difference between the actual portfolio loans which are the construction loans that we just talked about and you can see here that we said 4.375% for construction money, so they don’t actually have a limit on the amount of money you can get for that if you go to your conforming you’re gonna have a different conforming loan amount depending on where you’re at in the country so a limit on the actual amount of money you can get at this rate.

30-Year and 15-Year Fixed Mortgage Rates for Kinecta Bank

You can see here the 30-year fixed conforming rates just like you’re buying an existing home, 4.875% with an eighth of a point you’re at 4.990% so right at 5.125% here as well, so these are all about 5/8th or so higher than what you’re paying for that portfolio loan for the construction money so you can see this, the differences in the 15-year are they’re a little bit lower.

Mortgage Interest Rates

Now I want to show you this article from Forbes, they just published this and this talks about the actual 30-year mortgage rate as a 4.27% for 2022 and the average 30-year fixed mortgage rate now is 5.5%, so 5.5% that’s actually changed, it’s gone up 0.16% of a point just from last week so they were at 5.34%.

The 15 year fixed is at 4.74% that’s changed and almost gone up a quarter of a point so 0.24% of a point up from last week, it was a 4.5%, and your jumbo loan at 5.38% with a .15% change so that was 5.23% last week, so significant increase. It keeps continually going up, these are almost over a point higher. The 5.5% in a 30-year fixed mortgage to actually purchase the resale home versus actually getting that portfolio loan for the construction money. So there’s a pretty good deal still for some of the construction money out there so you can check that out.

How Interest Rates Affect Mortgage Payment Affordability for Homes

To give you a little bit of context too when you are looking at what an interest rate does to your mortgage payment. You’re going to see that every point that it goes up, so 1% or goes up a point you’re going to get about a 10% reduction or increase in the payment which is a 10% reduction in your affordability of that payment, so it’s significant. If you have a $500,000 home you’re going to have 1% of that $500,000, it’s going to be $5,000 a year divided by twelve and that’s the increase in your mortgage payment.

Example of Reduced Mortgage Payment Affordability

Look at the people that had purchased the homes in January for let’s say the same price, the homes haven’t gone up in value, it’s now April, say that’s the case but the interest rates went up a point or two. If they went up a point that affordability at home actually has a 10% higher payment even if it’s the same price based on the interest rate’s going up. If it goes up two percent which it has since the end of December 2021 you’re looking at a 20% increase in the payment. A decrease of 20% affordability on that particular home.

Land and Housing Market Changes in the Middleton, Idaho Area

There are going to be some market changes, you’re already seeing a little bit less demand based on the increased payments that you’re seeing. We’re starting to see a few reductions up here in the Middleton, Idaho area as far as some of the actual land prices. It went sky high, really high, you’re starting to see some of those start to drop. A few price reductions are happening especially on the upper-end houses, another thing is the houses that are out farther we’re starting to see with the gas prices those houses are kind of getting affected, they’re sitting on the market a little bit longer.

People aren’t driving as far into the city to work because of the extra cost of gas, it’s like a mortgage payment, it’s just adding to the cost each month. There are definitely some pressures there that are going to affect what you know, what people are deciding to do today.

Wrapping Up

I hope that’s a good update, that’s we’re at for home construction loan interest rates and price reductions on 4/27/2022. There’s still a good opportunity out there for your construction money and you can possibly lock something in, it’s a 60-day lock. All right, I hope that helps you all. If you’d like more information make sure you review our website, thank you so much and have a wonderful rest of your day.

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