Interest rates. They are used for credit cards, checking accounts, loans of every imaginable kind, and of course - for mortgages.
When interest rates rise, they make buying a home more expensive. When interest rates drop, the cost of buying a home also drops.
What has happened in the past week is something that is very client friendly - interest rates have dropped.
Interest rates can drop on any given day, and so this creates a buying opportunity, but the window is often a short one.
What can it mean for you?
Well, the impact on a payment due to a difference in rates depends on how much the rates have changed and the loan amount. When the loan amount is higher, a drop in rates has more of an impact.
Assuming a purchase price of $400,000, with 20% down your loan amount would be $320,000. At the beginning of the year, rates were 4.625% on a 30 year fixed loan. Today, that same loan would be 4.125%. The difference in payment is $95 each month ($1645 at 4.625% and $1550 at 4.125%).
So, your buying power improved by $95 each month with the improvement in the rate - meaning you could qualify for a larger loan amount of $340,000 for essentially the same payment from the beginning of the year.
Given that competition has been very high for homes, a drop in the interest rate can allow you to offer more than originally planned without increasing your payment!
Simply stated, you can compete more effectively for a home with lower rates.
We recommend that you get your loan approval in place now and to be in ready position as a buyer, and to advise your realtor that you can be more aggressive in your pursuit of a home by offering more!
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