WHAT DOES IT MEAN TO YOU IF MORTGAGE INTEREST RATES AND HOME PRICES RISE?
An increase in Mortgage Interest Rates, or home prices, will decrease the amount of "house" you can get for your money. An increase in both at the same time will have an even greater impact.
One point of view on "What Happens When Interst Rates Rise?" published by RISMedia can be found here.
An increase in the Interest Rate only, will result in a higher monthly payment, in order to lower your monthly payment you will have to reduce the size of your loan, which means you will need to search for Houses for Sale at a lower price than with previous Interest Rates.
An increase in the price of Houses for Sale only, will result in a larger loan, which will result in larger monthly payments. Once again you will have to search for Houses for Sale at a lesser value.
Looking at the above statements you can see, that if Interest Rates, and House prices, both rise, the house you can afford may not be the one you are looking at now.
Does this mean you should stop looking? Probably not. Interest rates have been historically low and if they rise they will go back to the once normal rate. This is true of housing prices too. BUT there will be a difference in your monthly payment.
Your first step is to meet with a Lender to determine what you can afford and an estimate of your monthly payment. Just be aware that the buying process may take a few months and interest rates could rise during that time. If you have already spoken with a Lender contact them and ask how the changes are effecting you. For a list of Lenders contact Margaret C. below.
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This blog is for informational purposes only and is not intended as legal or tax advice. An Attorney, CPA, Lender or other specialist should be consulted for specific needs.