Money and Main Street
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Castle Rock, Colo.
Castle Rock, CO
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Purchase price: $480,000
Price change from peak: -7%


During the height of the bubble, most homebuyers were scraping against the edge of affordability. If they experienced any kind of financial setback, it spelled doom for the deal. Now, though, falling sale prices and historically low interest rates have restored some wiggle room.

Take Larry Tunnicliff and his wife, Naoko. They contracted for a new home in Castle Rock, Colo., a suburb of Denver, several months ago. But when Naoko lost her job, it sent the annual family income south by $60,000.

They're following through on their Jan. 30 closing anyway.

They are paying $480,000 for the new construction and are financing $417,000 of that with a Veteran's Administration loan. Fortunately, considering Naoko's current employment situation, they were able to lock in the loan at 5%. That yielded a monthly mortgage payment of about $2,240, affordable on one salary.

"When we signed the contract back in June, we got a 6.5% interest rate," said Larry. "And that was with good credit scores of 780 for me and 815 for my wife."

Last Monday they were able to lock in a new rate of just 5%, making the loan much more affordable. Every tenth of a point down saves about $33 a month. The drop from 6.5% to 5% is a net savings of nearly $400.

If interest rates had not declined, Tunnicliff said he would have walked away from the house after Naoko was laid off. He would not have felt comfortable making the payments on just on his salary from working as a civilian employee at the Inspector General's office, the watchdog that monitors military spending.

"We have two small children - 7 years old and 12 - and there is no way I would have put them through the stress of being `house poor,'" he said. - L.C.

NEXT: Duluth, Ga.
Last updated June 15 2009: 10:24 AM ET
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