Most times when a buyer is trying to determine if they can afford to buy a house or not, their monthly payment is key. Calculating a mortgage, and ultimately a purchase price on a monthly payment ceiling is the easiest way to find out how much home you can afford to buy. The recent changes in mortgage rates have increased everyone's buying power, and depending on the price range, makes a significant change in the quality and size of home you can afford to buy.
Six months ago, 30-year fixed home mortgage rates were ranging around 5%. These rates vary slightly day to day, but for purposes of comparison, we will use an even number. Today, 30-year fixed mortgage rates are right at 4%. How much home can you afford to buy now? Take a look at the chart below for an idea of the increased buying power you have right now.
If you want to have a mortgage payment of no more than $1,000 per month (excluding taxes and insurance), you can purchase a house up to $209,461.24 in price. Six months ago, you would have been able to only purchase a house up to $186,281.62. That's an increase in buying power of $23,179.62! In a housing market with homes in the $200,000 range, the 11% increase in the amount of home you can now afford is huge.
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In the mid-range housing market of homes around $500,000, your monthly mortgage payment of $2,500 will get you a home that is now priced at $423,653.10 vs. a home priced at $465,704.04 six months ago. More house for less money - that's what everyone wants in today's real estate market.
However, the lower interest rates come at a cost. Mortgages are harder to qualify for these days, and mortgage loan limits have decreased. Credit scores need to be solid, and new rules for mortgage qualification that include not only your credit history, but your job history and use of short-term loan products will now be included for consideration. For most conventional loans, creditors are looking for at least a 20% down payment of the purchase price. Investors or second home owners will need 25% down on a conventional loan.
There are still several federal programs available to assist the first time home buyer, and those that are looking to invest in homes in specific neighborhood revitalization areas. These include the HomePath Program, CHFA and the Neighborhood Stabilization Program, all which require as little as a $1000 down payment. Smart buyers and investors will look for properties that have been approved for this type of financing.
More more information on any mortgage programs, including the down payment assistance program, contact me at Sellers.Celia@gmail.com, or go Denver Neighborhood Homes. New information on mortgage trends is posted frequently at Facebook.com/DenverNeighborhoodHomes, so "like" the page to get updated!