Less Debt + Low Interest Rates = More Buying Power: A Winning Equation

Mortgage and Lending with NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 IL Lic 031.0006220/WI


                   Less Debt + Low Interest Rates = More Buying Power: 

                                                  A Winning Equation   


In marketplaces where high demand for home buying is coupled with a short supply of homes for sale ... additional factors are pushing prices higher ...  


The short supply of homes now available for sale in many of the areas across the U.S. weighs heavily in the equation.  The National Association of Realtors recently reported that, in September, the total housing inventory in the U.S. hit a new record low.  


There was just a 2.7 month supply of homes available for purchase during the month of September.  That rate sunk even lower in October, falling to a 2.5 month supply.


But during that same time period and previous months, many hopeful homebuyers have been: 

  • Eliminating debt 
  • Lowering their monthly debt 
  • Saving more money for a down payment & closing costs 


These NAR statistics, plus other economic factors (shared below) are creating new opportunities for buyers and sellers alike.  As a loan officer, I'm finding that many of my clients and new home buyers are now seizing the unique set of circumstances and opportunities before them.  


Current homeowners are calling to assess their ability to sell and then buy again.  If not wishing to sell, they're considering a refinance of their current home as a way to save money or buy an investment property for additional income.


Many of these applicants have established a simple goal for themselves during this unique time period.  They've established and followed a budget that allowed them to save more money.  They had a goal in mind ... to begin a home search or investment property search sooner than later.  


Their goal, paired with what is perhaps the only positive of the current pandemic ... forced savings ... has helped them to reduce their debt, improve their credit scores, accumulate a downpayment, save for closing costs, and start their home buying search more quickly than previously expected.  It truly speaks to the old adage, "turning lemons into lemonade".


Add to the above advantageous equation, the low low interest rates available to consumers at this time.  Teamed together, they are helping current home buyers by expanding their home buying power.  Borrowers are now able to qualify for higher loan amounts and homes with higher purchase prices.


Less debt typically translates into higher credit scores for consumers too.  That is especially important for those buying a home. Higher credit scores = Lower interest rates = lower monthly mortgage payments.  


Just look at how a lower interest rate (associated with better credit scores) reaps real savings:


         LOAN                         TERM                      RATE

         $225,000                     30 Years                     3.00%             

  Equals = $948.61 Principal & Interest Payment monthly

         $225,000                     30 Years                     4.50%

  Equals = $1,140.04 Principal & Interest Payment monthly

  • $192.00 Difference in monthly payment
  • $68,916 Difference in interest over the life of the loan
  • $38,000 more in Buying Power
  • 1.5% Difference in Interest Rate

* Interest Rates are for illustration purposes only

* Note:  A 4.50% interest rate was fairly typical 2 years ago. For those that purchased at that time and have that interest rate on their mortgage, it would be wise financially to talk to a lender to see if a refinance is possible.


So even though a large portion of the year 2020 has been difficult for all in many ways, there have been some positives for consumers within mortgage financing and housing markets.  Although unintended, these consequences have proven good for those in a position to take advantage of them.


Everything mentioned above can lead to more sellers being successful when listing and selling their homes.  It allows them to relocate, downsize, and/or buy the step-up home they've been dreaming of.  


The benefactors of that scenario could be:

  • Home Builders 
  • People looking to turn equity into a second home purchase  
  • Investment Property buyers looking for rental income


Remember I mentioned additional economic factors above? 


Fannie Mae and Freddie Mac (Government Sponsored Enterprise/GSEs) have also just announced that they are increasing Loan Limits for the upcoming 2021 year.  


In most of the U.S., the new maximum loan limit will be:


  • $548,250, an increase from $510,400 or $37,850 higher than 2020. (Conforming loan limit (CLL) for one-unit properties)
Please note:  
  1. New limits also apply for 2-4 Unit properties (and up).  Contact a Lender for further info
  2. For those portions of the country where housing prices are much higher, different conforming loan limits apply.  Click HERE for a map of conforming loan limits across the U.S.
While this higher loan limit does not affect all buyers, it may provide relief to those home buyers previously considering a Jumbo Loan.  With the new higher loan limits announced, those considering a higher-priced home purchase can broaden their choice of potential mortgage lenders.  They also may find the qualification for their loan accomplished more easily.  The use of a Jumbo Loan may be circumvented entirely.
The GSEs announcement reinforces the overall message that ... for those dreaming and capable of buying or refinancing a home or property purchase at the present time ... opportunity for savings exists within mortgage financing and home buying.  The equation of higher loan limits, less debt, and low interest rates currently translates to more home buying power for consumers.
No one can predict for certain how long these positives and opportunities to buy or refinance may last.  So now might be the time for you to take action. 
Don't hesitate to reach out to a lender to ask questions and get the facts and information you need to make a sound decision.
* Are you dreaming of buying or refinancing a home or Investment Property in New Lenox - Will County - Chicagoland ... IL or WI?

Contact me today! I'll put my 40 years of mortgage experience and expertise to work on your behalf. I'm easily found at:

                                                        Gene Mundt
Mortgage Originator - NMLS #216987 - IL Lic. 031.0006220 - WI #216987

American Portfolio Mortgage Corp
NMLS #175656
Direct: 815.524.2280
Cell: 708.921.6331
eFax: 815.524.2281




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Gene Mundt

 Mortgage Originator  -  NMLS #216987    

                                 IL Lic. #031.0006220  -  WI License #216987                                                                                                    

NMLS #175656


Gene Mundt, Mortgage Originator,  40+ years of #mortgage experience, will offer you exemplary mortgage service and advice when seeking:  #Conventional, #FHA, #VA, #Jumbo, #USDA, and Portfolio Loans in #Chicago and the greater Chicagoland region, including:  The #Lincoln-Way Area, #Will County, (#New Lenox, #Frankfort, #Mokena, #Manhattan, #Joliet, #Shorewood, #Crest Hill, #Plainfield, #Bolingbrook, #Romeoville, #Naperville, #Wilmington, #Peotone, etc.), #DuPage County, the City of Chicago, #Cook County, and elsewhere within IL and Wisconsin. 


Your Referrals & Testimonials are Always Greatly Appreciated! 



Comments (9)

Pat Champion
John Roberts Realty - Eustis, FL
Call the "CHAMPION" for all your real estate needs

Now is a great time to buy; not later. Thanks for sharing. I hope you have a great weekend!

Dec 04, 2020 01:35 PM
Ron and Alexandra Seigel
Napa Consultants - Carpinteria, CA
Luxury Real Estate Branding, Marketing & Strategy


You made an excellent point about eliminating debt.  Wishing you a wonderful weekend.  A

Dec 04, 2020 02:21 PM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Gene I agree.  That is a winning formula!!!

Only two things impact the Debt-To-Income (DTI) Ratio, dept and income.  You either need more income or less debt.  Lower interest rate = less debt, which in turn equals more income for a mortgage payment.

Dec 04, 2020 04:45 PM
Brian England
Ambrose Realty Management LLC - Gilbert, AZ
MBA, GRI, REALTOR® Real Estate in East Valley AZ

That definitely is a formula for success and I know that you will always lead buyers in the right direction for the best loan for them.

Dec 05, 2020 04:59 AM
Rocky Dickerson
Realty One Group - Las Vegas, NV
Superior Service!

Great post today Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi  many folks don't realize the buying power they have these days.

Dec 05, 2020 12:54 PM
Kathleen Daniels, Probate & Trust Specialist
KD Realty - 408.972.1822 - San Jose, CA
Probate Real Estate Services

Hello Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi - yes, eliminate debt!  So many people took advantage of the lower rates by refinancing.  A wise thing to do ... we may not see rates that low again in my lifetime. 

Dec 05, 2020 02:00 PM
Jane Peters
Home Jane Realty - Los Angeles, CA
Los Angeles real estate concierge services

Another great post, Gene. The current situation has been at least good for tose getting their financial affairs healthy and ready to make their next purchase. More grist for my mill.

Dec 10, 2020 02:58 PM
Patricia Feager, MBA, CRS, GRI,MRP
Selling Homes Changing Lives

Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi - I miss seeing you on ActiveRain. I hope all is well and life is good. Do drop me a line/comment. Would love to hear from you again. 

May 03, 2021 07:55 AM
Endre Barath, Jr.
Berkshire Hathaway HomeServices California Properties - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Gene awesome advice, Diane and I have been on the same page not as buyers but as home owners to reduce our debt.... Credit Cards, othere credits.... and reducing the Mortgage.... now if I was a buyer same idea, more cash available and minimum debt like when we bought our home.... Endre

Oct 07, 2021 10:11 PM