Mortgage rates work to get up this year, but they are still incredibly low compared to the historical one average. However, whenever the mortgage rate changes, it affects what you can afford to borrow when you buy a home. Like Sam Khater, Chief Economist at Freddie Mac, shares:
“Since January, mortgage rates have risen by half a percent of historic low and house prices have risen, leaving potential home buyers with less purchasing power. “(See graph below):
When buying a home, it’s important to determine a monthly budget so you can plan and understand what you can pay. However, when you need to meet your budget, even a small increase in the mortgage rate can make a big difference.
According to the National Association of Real Estate Agents (NAR), today, the average existing home price is $ 313,000. Using $ 300,000 as a simple number close to the middle priceHere’s an example of how a change in mortgage rate affects your monthly down payment and interest payments on a home.If, for example, you are willing to buy a house and know that your budget allows a monthly payment of $ 1200-1250 (gray marked on the table above), each time the mortgage rate increases, the loan amount must decrease keep your monthly cost in the distance. This means you may have to look for cheaper homes when mortgage rates rise if you want to keep your budget.
Basically, it is ideal to close a home loan when mortgage rates are low, so you can afford to borrow more money. This gives you more purchasing power when you buy a home. Mark Fleming, Chief Economist at First American, explains:
“Monthly payments remained manageable despite high home prices due to low mortgage rates. In fact monthly payments remain below the range of $ 1,250 to $ 1,260 we saw in fall 2018 and spring 2019, but they are on track to reach that level this spring.
Although they remain low, mortgage rates have started to rise and are expected to rise later in the year, so affordability will test buyer demand in the previous months and will likely help slow the pace of price growth. “
Today’s mortgage rates are still very low, but experts say project they will continue to rise modestly this year. As a result, every moment is valid for home buyers who want to secure the lowest mortgage rate in order to be able to afford the home of their dreams.
Thanks to low mortgage rates, the spring housing market is booming for buyers – but these favorable conditions may not last long. Let’s connect today to start buying a home while your purchasing power is still strong.
Content previously posted in Keep Current Things