Mortgage Rates and Purchasing Power

By
Mortgage and Lending with Diamond Residential Mortgage Corporation 031.0016549 NMLS#219299

 

 

Mortgage Rates and Purchasing Power


How Does Purchasing Power Work? You’ve heard the term before — but really, what does ‘purchasing power’ mean? In its most basic form, purchasing power means what you can buy for a given amount of money. For example, a cup of coffee that cost $1 in 2010 now costs almost $4 (thanks, Starbucks!). You buy less gas with $25 today than you did a few years ago, and a car that costs $35,000 once could be bought for less than $10,000. So the pur...chasing power of a dollar has dropped over time. Inflation makes items cost more and lessens purchasing power.

Buy Low …
So when costs are low, it’s better to buy, before they rise, right? That may not exactly work with a cup of coffee, but it definitely works with things like cars, airplane tickets, and of course houses. When it comes to buying a home, your purchasing power is directly related to several factors, including the availability of desirable homes, average home prices, and the current mortgage rate.

Today’s interest rates are still astonishingly low. The average rate for 30-year fixed-rate loans over the last 40 years has been around 8.9 percent. But over the last several months, mortgage rates have been in the 3-4% range. This is significantly lower than the historic average — but higher than it was a year ago. Experts are predicting mortgage rates to steadily go up, possibly to as high as 5% by the end of the year.

Little Numbers, Big Difference Five percent might not seem like a lot, but when you do the math, you’ll see that even a quarter of a percent rise in mortgage rates will significantly lessen your purchasing power and make a big difference to how much you end up paying for your home. Just check the following chart, which assumes you put 20% down (although loans are available with only a 3% down requirement — call me to learn more!).

Your Monthly Payment Rate Loan Amount Purchase Power
$1,500 3.75% $323,893 $404,867
$1,500 4.25% $304,915 $381,144
$1,500 5.00% $287,551 $279,422

Don’t be like the family who delayed and delayed buying, and ended up shopping in the $270,000 price range rather than the $380,000 range and had to settle for two bedrooms rather than three. With rates this low, the smart buyer makes a move. The market can’t sustain these numbers for long, and won’t need to as it improves. If you’re considering a new home purchase, contact me today to see the strength of your purchasing power — before it drops!

 

 

Posted by

 

 

"Wealth is what you accumulate, not what you spend." 

 
With Respect; 

William Piotrowski

Mortgage Originator  
Originator License # 031.0016549
N.M.L.S #219299 

 

582 Oakwood Ave

Lake Forest IL 60045

 

Cell.(630).881.8655

E.fax (888).845.2691

 

State License NMLS FaceBook  Truila

 

 

close

This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
Topic:
ActiveRain Community
Location:
Illinois Du Page County Naperville Sawgrass Winds
Groups:
Active Rain Newbies
Realtors®
Chicagoland and Northern Illinois Real Estate
Illinois Real Estate
Tags:
mortgage rates and purchasing power

Post a Comment
Spam prevention
Spam prevention
Show All Comments
Rainmaker
185,663
Jennifer Ferri
Title Junction, LLC - Fort Myers, FL

Another great blog post, thanks for sharing!

Jul 20, 2015 01:49 AM #1
Rainmaker
1,143,921
David Shamansky
US Mortgages - David Shamansky - Highlands Ranch, CO
Creative, Aggressive & 560 FICO - OK, Colorado Mtg

William this is an excellent post!

You are SO right about purchasing power and why to act NOW instead of delaying

Jul 20, 2015 04:08 AM #2
Rainmaker
1,229,741
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Nothing speaks louder than hard numbers, William Piotrowski ... so kudos to you for including them within your post.  Even small changes in rates can mean more or less home you can purchase ...

Gene

Jul 20, 2015 08:09 AM #3
Post a Comment
Spam prevention
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?

Rainer
338,949

William Piotrowski

Ask me a question
*
*
*
*
Spam prevention