Rising Intrest rates = Higher Mortgage payments for Home Buyers in Grand Rapids, MI.
How Do Rising Interest Rates Affect Affordability?
As responsible Lenders it is up to those of us who care deeply about our clientele to help them understand how qualifying REALLY works. It is not accurate when a Home Buyer is told they qualify for a particular purchase amount.
When we pre-approve a borrower we do so by qualifying them on a certain payment, not purchase amount. There are a number of variables that can effect that payment amount...Taxes, Insurance, and Interest Rates being the main three!
Most Home Buyers, when educated properly, want to look at a payment that is comfortable for their lifestyle, based on their other expenses and personal needs. Who wants to eat Mac & Cheese every night.
When Interest rates begin to rise Affordability shifts downward for the buyer. A 1% increase in rates decreases buying power by 10%.
Things to carefully consider as rates rise:
Buyers will suffer if they have higher payments because they will not be able to maintain the lifestyle they are accustomed to. In a worse case scenario they may no longer qualify for the home they have purchased.
Buyers expectations will have to be lowered...this is a hard mental adjustment!
Buyers may choose to purchase at a later date with the hope that rates will come back...Dangerous, but some will do it!
Sellers will have fewer options and if they want to attract the same buyers again, they will need to take significant price reductions.
All parties will feel like they are losing or have lost.
Living in the present with your end goal in mind is the best defense.
Always keep this thought top of mind...There is NO TIME LIKE THE PRESENT!!
The Grand Rapids Real Estate Market has a plethora of options...ACT NOW if you wish to get the home you want...You will be thankful for years to come.