When Dropping Interest Rates Is Not Always Good...

In reading a recent article on interest rates, it was an interesting point that they are making regarding the expected drop in mortgage rates.  To buyers, a drop in mortgage rates is great because their payment drops or buying power increases.  So as investors are running to the bond markets and away from the volatile stock markets, the mortgage rate Is apparently going to drop and please the buyers—but maybe not all buyers!  This is because the banks lending may not see the jumbo loans as attractive at lower rates than previously, and may not offer as many of the larger loans, choosing to concentrate on the more conforming government loans.  So anyone looking to purchase in the higher price ranges may find it much harder to get those jumbo loans as rates drop… in Mendocino County the conforming limit is $417,000 so anything above becomes a jumbo loan.  In Sonoma County the limit is $554,300.  If a buyer is looking for a large home or home on land, these limits can be reached and exceeded very quickly!  So having the interest rate drop is not always the best thing to happen…

(the article I was reading can be located at: http://realtormag.realtor.org/daily-news/2016/02/22/mortgage-rates-may-be-headed-for-record-low?om_rid=AAC4q5&om_mid=_BWy2jFB9K9eisH&om_ntype=RMODaily)