What kind of loan rate could I get now?

Byline: | Category: Economy | Posted at: Tuesday, 30 September 2008

To test Nancy Pelosi’s hypothesis that after eight years of President Bush the economy is in far worse shape than it was under President Clinton at a time of “budget surpluses,” I went to Lending Tree to see what kind of mortgage terms I could get to buy my first home today. 

It was the spring of 1996 and I was newly stationed at Fort Hood, Texas along with my very pregnant wife who was one month away from delivering our first child.  We found the home we wanted to buy in Harker Heights, just a few miles east of post.  The purchase price was $110,000, and because we were only going to be there a few years, a 30-year loan made little sense.  So we bought the home on a 15-year fixed-rate VA mortgage of 8.0%, zero points and zero down.  If I remember correctly, the monthly payment ended up being $1,211.

So what kind of offer did I get today in the midst of this horrible financial crisis?  I got four offers, the lowest of which was a 15-year fixed-rate VA mortgage of 6.0%, zero points and zero down, yielding a monthly payment of $948.20.  Yes, that’s right, as bad as everyone says the economy is today, I can get the same mortgage as I had twelve years ago for about $250 a month less than I was paying 12 years ago in the midst of a “great” economy.

But what about the rise in prices of real estate, you might argue?  Good question.  So I checked Realtor.com to see what my old house might cost today.  While that particular home isn’t currently on the market, another home with the same floorplan and in the same subdivision is listed at $139,000.  Plugging that amount into the 6.485% effective annual percentage rate of the mortgage I was offered today and I could buy my old home again today for $1,209.69 a month–about a dollar less than what I was paying for the same home in 1996.

A little perspective is in order.  Maybe that’s why, while politicians are in disarray, Drudge reports that “calm returns” to Wall Street.  Could the people be smarter than the politicians? 


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19 Responses to “What kind of loan rate could I get now?”

  1. Tom at the Real Estate Bloggers Says:

    It is not a matter of intelligence but a matter of greed.

    These politicians are so focused on getting something for their special interest lobbyists that they are failing to see true problems out there.

    The laws will not be written for the American people but for the special interests that command the politicians attention.

  2. The Bovina Bloviator Says:

    This morning I got an e-mail from Bank of America announcing the limit on my credit card had been raised substantially, something I hadn’t even requested. I suspect the only people being denied credit these days are those who never should have had it to begin with.

  3. Zoot Fenster Says:

    As of yesterday, Carmax would still loan $20K at 7%. Bummer. I’m kind of hoping for a major car price drop. It’s been a long time since cash was king.

  4. SFC B Says:

    I’m starting to really think that this crisis effects two groups of people: wealthy people in the financial industry and people who have terrible credit who bought a home they cannot afford (poor people). If there are two groups which are capable of getting elected officials into a tizzy it is the wealthy folks who bribe them, and the teeming masses of poor folks who will vote for someone who promises to bail them out. This is a perfect storm of political pandering waiting to happen.

    Ed: Good points.

  5. Stone Dead Parrot » Testing the “crisis”… Says:

    […] Krumm decides to check out current mortgages to compare them to twelve years ago during the Clinton economy.  I could have told you the results without looking it up (HT/Instapundit): So what kind of offer […]

  6. The Snob Says:

    Yes, but how firm are those offers, really? I don’t know either way, but I just question whether this is even remotely significant. Banks will continue to seek out good and then excellent credit risks as things go down. As that happens the competition and lead generation efforts will get more intense, rather than less.

  7. BJM Says:

    Try zillow dot com for the info on your former home (or any address), including sale prices, current estimate and taxes. Zillow uses satellite mapping and has 360 degree photos as well as active real estate listings on a property. It’s very useful if you’re house hunting or getting ready to sell too. I used it earlier in the year when we relocated from one state to another.

    No, I’m not affliated with zillow, or comment spamming; just sharing a good resource.

  8. justacitizen Says:

    “I’m kind of hoping for a major car price drop.”

    Don’t hold your breath. Pelosi and the Democrats just gave Detroit unions $25 billion reasons not to haggle with you over the price of that car that gets 14 mpg.

  9. willis Says:

    “The laws will not be written for the American people but for the special interests that command the politicians attention.”

    Why speak so politely. I’m sure you meant to say: the laws will not be written for the American people but for the crooks that bribe the politicians. Think discount loans that can be conveniently foreclosed on without harm to the borrower’s credit, along with below-market-rate appartments, etc.

  10. The REAL Blue Says:

    Zillow’s no good in Texas because sales data is held as private information by Realtors.

  11. jaed Says:

    I have real trouble believing your house has only gone up about 27% in ten years. I mean, obviously I believe you, but it’s very foreign to my experience – where I live, a small house was gettable for that price in 1996, but the same house would now be maybe $300,000. And I don’t live in any of the extremely overheated markets.

    I wonder which experience is more typical?

    Ed: Harker Heights is just outside the gates of Fort Hood. As a largely military town, the upper limits to real estate appreciation are somewhat capped–particularly, as it is in Central Texas, where land isn’t exactly scarce. It’s not exactly a typical scenario. However, the price increase over twelve years is more than compensated by the change in the inflation-adjustment.

    The larger point remains: while twelve years ago I was ecstatic to get a 15-year loan for only 8%. Today I could get that same loan for just 6%. Perhaps I’m just old enough to know that 3.5% is the anomaly and couldn’t have possibly lasted forever, so today’s rates appear “normal” to me. Furthermore, I’m astounded that people (both borrowers and lenders) could be idiotic enough to believe that at that rate they should go for an ARM, since from such a level, there is only one direction rates could go: UP.

  12. Willmoore Kendall Says:

    What if the Democrats threw a financial crisis and nobody came? ACORN needs to get paid. Stealing elections costs money, you know.


  13. Anna Says:

    This is a big source of debate between my husband and myself. He thinks the economy is tanking and there’s a credit crunch. I pointed out how our friend refinanced her house just last week. House was appraised on Wednesday. Got the results Thursday, signed the new loan Thursday night. In California.

    I also went shopping yesterday and paid with my credit card (he hates credit cards). I told him about it when I got home, explaining that I just wanted to check if there really is a credit crunch.

    He was not amused.

  14. Panic! « In Other Words Says:

    […] not. The Instapundit quotes Bob Krumm, who make you wonder if it’s not all illusory, when he does an experiment. Krumm decided to […]

  15. mark simon Says:

    Hello, I am based in Hong Kong. I oversee a reasonably large portfolio of businesses.

    I don’t see a credit crunch. Letters of credit are opening, lines of credits for our businesses are being expanded on request and without request. Cash in a bank in Taiwan, in which we are large shareholders is at an all time high, as it is with many other banks in Taiwan and Hong Kong. People are concerned, but no panic.

    I have a proposal, one which will cost me money. I will give USD $200 to any homeowner who can show a panel, (myself, a friend I will not name now, and maybe Bob Krumm??), evidence that they have lost their primary residence based solely on the sub prime crisis and credit crunch. In other words through no fault of their own.

    There are some qualifiers. Home construction industry, mort brokers, real estate agents, bankers, all are not allowed as they were in the industry that was part of the problem. And if you have an alt A loan, or put down less than 15% then don’t bother appplying. Also, if your leverage is above 35% in terms of income to loan I think you may not want to show up. I am open to other qualifiers.

    I will do this for the first 15 people or up to USD $3000. I have offered other web sites more, but that seems to get me dismissed as folks wonder what is motivation.

    I just think that alot of us are tired of bailing out people who lived beyond their means. I do not want to see people lose their homes, but I just don’t believe that people are blameless. I want to hear some stories, and of course we will not abuse or make public people who come in with their story.

    Mark Simon, Hong Kong

  16. AK Says:

    Not that my anecdote means anything, but just as an experiment I asked my bank yesterday for an increase on my Mastercard limit, and they tacked on 20% without a credit check or anything.

    Yes, I’m a good customer, but apparently they’re not too concerned about finding the money to finance whatever large purchase I might make with that credit limit.

  17. SkyDancer Says:

    Mr. Krumm said he was approved for a VA loan. That is a government backed loan, not a conventional loan. He also uses Harker Heights as his housing example. Harker Heights has had zero appreciation/depreciation over the last year according to Trulia Trends. Compare this to 25+% depreciation in many parts of the country.

    His examples make for shocking editorial, but have little resemblence to the reality facing civilians who can not get zero-down, government backed loans no matter how high their credit scores are.

    Ed: For buyers, the 25% depreciation you decry is actually a benefit since it lowers the cost of the house, thus making a house even easier to purchase–particularly first-time home buyers who don’t have a current house they have to sell in a depreciating market.

    As for non-government backed loans, here are the other offers I received:

    15-Year Fixed, 0 down, 6.75%, effective APR 6.918%, monthly payments of $973.40
    30-Year Fixed, 0 down, 7.0%, effective APR 7.09%, monthly payments of $731.83
    15-Year VA Fixed, 0 down, 5.5%, effective APR 5.913%, monthly payments of $918.12 (a lower rate even than the previous low offer I received.)
    30-Year VA Fixed, 0 down, 5.875%, effective APR 6.14%, monthly payments of $664.68
    15-Year Fixed, 0 down, 6.75%, effective APR 6.9%, monthly payments of $973.40
    15-Year Fixed, 1% down, 6.375%, effective APR 6.60%, monthly payments of $950.68
    30-Year Fixed, 0 down, 7.0%, effective APR 7.079%, monthly payments of $731.83

    All of these loan offers–even the ones that aren’t VA-backed–are more than $200 less per month than the 8.0% loan I was happy to get in the midst of a “great” economy. So your point would be what?

  18. Mark Says:

    The point would be that your one example, your position and home overly weighted in positives for obtaining long term credit (even 12 years ago), needs repeated examples with control before anyone can begin to take it seriously as a rebuttal to Pelosi’s statement.

    Ed: Actually since she was the one making the claim, it was incumbent upon her to provide the evidence. She has not done so while I have provided an example to counter her claim. The ball is still in her court.

  19. Mark Says:

    What you have provided, my friend, is an anecdote, not an example.

    Ed: A distinction without a difference. Ball’s still in her court.