I purchased my first home back in 1984 when interest rates were 21% (not a typo). I was lucky to get a First Time Homebuyer's bond that reduced the rate to 18%. I lived in that house for 20 years and refinanced it twice.
If you're going to buy at house today at 5% or 6%, just remember that you're not locked into that rate for the life of the loan. You can refinance later if the rates decline. If you're postponing purchasing a home now, you run the risk of rates going higher and taking longer to settle back down.
The 1/10 Rule is that for every 1% of interest rate increase, your buying power goes down by 10%. The converse is also true - if interest rates go down 1%, your buying power increases by 10%.
So for a $250,000 loan amount, here's what happens with changing interest rates:
If you can't handle the increased payment amount, there are ways to make adjustments to get into a home:
- increase the amount of the down payment
- change to a longer loan term
- investigate adjustable rate mortgages
- look for an assumable loan
Don't give up on finding your home. I can help you with the search and put you in touch with lenders who can help. Contact me today!