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How Todays Mortgage Rates Impact Your Home Purchase

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Real Estate Agent with HomeSmart 0561240

How Todays Mortgage Rates Impact Your Home Purchase

If you're planning to buy a home, its critical to understand the relationship between mortgage rates and your purchasing power. Purchasing power is the amount of home you can afford to buy that's within your financial reach. Mortgage rates directly impact the monthly payment you'll have on the home you purchase. So, when rates rise, so does the monthly payment you're able to lock in on your home loan. In a rising-rate environment like were in today, that could limit your future purchasing power.

Today, the average 30-year fixed mortgage rate is above 5%, and in the near term, experts say that'll likely go up in the months ahead. You have the opportunity to get ahead of that increase if you buy now before that impacts your purchasing power.

Mortgage Rates Play a Large Role in Your Home Search

The chart below can help you understand the general relationship between mortgage rates and a typical monthly mortgage payment within a range of loan amounts. Lets say your budget allows for a monthly mortgage payment in the 2,100-2,200 range. The green in the chart indicates a payment within that range, while the red is a payment that exceeds it (see chart below):

How

As the chart shows, you're more likely to exceed your target payment range as mortgage rates increase unless you pursue a lower home loan amount. If you're ready to buy a home, use this as your motivation to purchase now so you can get ahead of rising rates before you have to make the decision to decrease what you borrow in order to stay comfortably within your budget.

Work with Trusted Advisors To Know Your Budget and Make a Plan

Its critical to keep your budget top of mind as you're searching for a home. Danielle Hale, Chief Economist at realtor.com, puts it best, advising that buyers should:

Get preapproved with where rates are today, but also consider what would happen if rates were to go up, say another quarter of a point, . . . Know what that would do to your monthly costs and how comfortable you are with that, so that if rates do move higher, you already know how you need to adjust in response.

No matter what, the best strategy is to work with your real estate advisor and a trusted lender to create a plan that takes rising mortgage rates into consideration. Together, you can look at your budget based on where rates are today and craft a strategy so you're ready to adjust as rates change.

Bottom Line

Even small increases in mortgage rates can impact your purchasing power. If you're in the process of buying a home, its more important than ever to have a strong plan. Lets connect so you have a trusted real estate advisor and a lender on your side who can help you strategize to achieve your dream of homeownership this season.

 

 

 

 

 

Posted by

e signature for Shayne Stone

“YOUR Rock-Solid Choice Realtor for Making Home Sellers a Profit & Home Buyers Equity”

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Eric Bouler
Gardner Realtors, Licensed in La. - New Orleans, LA
Listening to your Needs

Lots of blogs about rates. I like to view rates. My only rate was 8.25% in 1975...

 

May 23, 2022 07:34 AM
Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Hello Shayne and Thank You for the great information to share here in the Rain with us.  Make it a great start of the week!

May 23, 2022 08:29 AM
Kristin Johnston - REALTOR®
RE/MAX Platinum - Waukesha, WI
Giving Back With Each Home Sold!

Great  information.   Thanks for sharing and enjoy your day!

May 25, 2022 06:59 AM