What Does $150 a Month Buy?

What Does $150 a Month Buy?  I had an interesting conversation today with our in-house Senior Mortgage Advisor, Mike Fagan.  Although no one can predict when or exactly how much, Mike believes it seems likely that interest rates will be on the rise over the next several months and/or years.  The Federal Reserve has the difficult job of trying to keep interest rates low enough to stimulate borrowing, but high enough to ward off inflation.

The potential for interest rates to increase should be of particular interest to Home Buyers, and to Home Owners with adjustable rate mortgages.  As interest increases, so does the mortgage payment.  Here's an example:

To purchase this home at 509 Newburg Avenue, at today's mortgage rate of 4.625%, with an FHA loan and 3.5% down payment, the total PITI payment would be $1840.  If interest rates go up just 1% over the next year, the payment for the same loan at 5.625% jumps to $1997.  A difference of $157.

What is the cost of waiting a year to purchase your home - what does $150 a month buy?  Well right now, about 50 gallons of gas.  Or 38 gallons of milk.  Maybe it pays your family's phone, internet and TV bill for the month.  Perhaps it's what you spend eating out in a month.  It could be your monthly utility bill, or a good portion of it.

Whatever you would spend it on, $150 a month is not a sum of money anyone should ignore.  If you're thinking of buying a home, give me a call to find how the rising interest rates are likely to affect your home purchase.

If you'd like more information on what the financial markets are doing, Mike Fagan sends out a weekly Mortgage Market Update.  His informative newsletter begins with a Week in Review and gives a quick Forecast for the upcoming Week, and other useful financial tips.  This week's newsletter had the IRS standard mileage deduction rates for 2011.  If you're looking for detailed information on what's happening in the economy, in a language you can understand, give Mike a call to receive his mmgWeekly.