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Many 1st Time Homebuyers Make This Mistake

By
Real Estate Agent with RE/MAX Stars Realty

When it comes to buying your first home, you will likely receive a lot of advice from your family and friends.  Some of this advice is well intentioned and can be very helpful.  However, many 1st time buyers are hyper focused on just the price of the home and that is a BIG mistake for most buyers especially if they are going to be obtaining a mortgage to purchase the property.  The home price can be VERY important but it is not the only thing that you should be concerned about.  

This one minute video below provides an example of how just a 1/2 percent difference in your interest rate can reduce the loan amount and home price that you qualify for and this can make or break your ability to be able to afford to purchase the home you really want to buy.  Let's say for example purposes that you were pre-approved by your lender at 6.5% interest and based on your current income and your personal debts, you qualify for a $300,000 with a monthly payment of $1,896.  So far so good!

Now let's say that right before you make an offer on the home you want to buy, the interest rate for your loan jumps up from 6.5% to 7%.  You may not think much about this but things just changed for you.  You will likely no longer qualify for a $300,000 loan any longer.  You will likely qualify for a loan of about $285,000 with the increase of interest rate and you will still have a payment of $1,896.  Many buyers do not realize that their loan approval is based on a specific interest rate and if that interest rate goes up, the amount you will qualify to spend on a home or loan is going to be less.

Are you or someone you know thinking about buying a home in Central Ohio?  Add a comment below or give us a call at 740-397-7800 and our team would be happy to help you.

Sam Miller
REMAX Stars Realty

SamMillerSells.com

Comments(15)

Michael Elliott
Fathom Realty - Burlington Township, NJ
Burlington, New Jersey Residential Sales

Great info, Sam Miller .  I just followed you, please do likewise!

Apr 24, 2024 01:59 PM
Sam Miller

Thanks Michael!  I am now following you as well - Sam 

Apr 25, 2024 05:32 AM
John Pusa
Glendale, CA

Hello Sam Miller excellent report for many 1st time homebuyers make this mistake.

Apr 24, 2024 04:50 PM
Sam Miller

Thanks John!  It is easy to understand why buyers tend to focus on price but so many times they miss out on the long term savings that is associated with the loan and interest rate - Sam 

Apr 25, 2024 05:33 AM
KAREN SANCHEZ
Reputable Realty - Apple Valley, CA
...Marketing your home like no one else will.

I like that, videos easy to follow and easy to understand.

Apr 24, 2024 05:39 PM
Sam Miller

Thanks Karen!  I have found that most people want it short, straight forward and easy to understand - Sam

Apr 25, 2024 05:33 AM
Kathy Streib
Cypress, TX
Home Stager/Redesign

Hi Sam- I love this explanation!!! I'm sure there are many first-time home buyers who are strictly looking at the price of the home. It's good to keep in mind how much a slight bump in interest rates can impact what you qualify for. 

Apr 24, 2024 05:45 PM
Sam Miller

Thanks Kathy!  It amazes me how many parents of the first time home buyers are laser focused on price and not the overall affordability when it comes to their children buying their first home - Sam 

Apr 25, 2024 05:36 AM
Richard Weeks
Dallas, TX
REALTOR®, Broker
Great information, thanks for sharing.  I hope you have a great day.
Apr 25, 2024 04:32 AM
Sam Miller

Thanks Richard!  There are so many topics that we all need to cover to help educate first time buyers especially now relating to many of the upcoming changes that are likely on the horizon - Sam 

Apr 25, 2024 05:37 AM
Kathy Streib
Cypress, TX
Home Stager/Redesign

Apr 27, 2024 06:02 PM
Sam Miller

Thanks Kathy!

Apr 28, 2024 06:02 AM
Nina Hollander, Broker
Coldwell Banker Realty - Charlotte, NC
Your Greater Charlotte Realtor

Good morning, Sam... a terrific reminder to all home buyers, not just first time buyers. That's one reason I'm asking my buyers to get their pre-approvals updated every month or so.

Apr 28, 2024 04:57 AM
Sam Miller

Thanks for commenting Nina!  I have had dozens of conservations with buyers who didn't realize they were house hunting in a price range they no longer qualified for - Sam 

Apr 28, 2024 06:05 AM
Kat Palmiotti
eXp Commercial, Referral Divison - Kalispell, MT
Helping your Montana dreams take root

True, a slight change in interest rate can have a significant effect on the amount a buyer can afford/be approved for.

Apr 28, 2024 05:01 AM
Sam Miller

Thanks Kat for commenting!  It will be interesting to see when the rates swing the other way and drop down and buyers qualify for more than they thought they could afford - Sam 

Apr 28, 2024 06:16 AM
Wayne Martin
Wayne M Martin - Oswego, IL
Real Estate Broker - Retired

Good morning Sam. Those on the bubble of qualifying should lock the rate if they can because most of the public does not fully understand. Enjoy your day. 

Apr 28, 2024 05:52 AM
Sam Miller

Thanks for commenting Wayne!  I wish more buyers would work with their lender and lock their rates in so they didn't risk the rate bumping up on them - Sam 

Apr 29, 2024 04:24 AM
Dorie Dillard Austin TX
Coldwell Banker Realty ~ 512.750.6899 - Austin, TX
NW Austin ~ Canyon Creek and Spicewood/Balcones

Good morning Sam,

I'm so glad that Kathy Streib featured your post in her Sunday Series as I missed it! I really like the video. You are right, it is easy to understand why buyers tend to focus on price but so many times they miss out on the long term savings that is associated with the loan and interest rate.

Apr 28, 2024 08:16 AM
Sam Miller

Thanks Dorie!  I agree that so many people miss out on the long term financial savings because they are too focused on the purchase price and not focused enough on the loan type and interest rates - Sam 

Apr 29, 2024 04:25 AM
Hannah Williams
HomeStarr Realty - Philadelphia, PA
Expertise NE Philadelphia & Bucks 215-820-3376

Sam Miller  My first-time home buyer not only did not take the time but interest rates went up plus I found him state bond money so now his buying price came down which was a tough price to begin with - all because he has been too lazy to look. Maybe rates will come down some and maybe they will not.

Glad Kathy Streib   featured

Apr 28, 2024 11:06 AM
Sam Miller

Thanks for commenting Hannah!  I am a big fan of exploring the different loan programs so that our clients can get the best deal that fits their current and long term plans.  I am hopeful the interest rates will adjust downward but until then, we cam keep shopping and comparing the different loan programs that are available to give out clients an advantage - Sam 

Apr 29, 2024 04:27 AM
Leanne Smith
Dirt Road Real Estate - Golden Valley, AZ
The Grit and Gratitude Agent

Very true and the lack of financial knowledge is so harmful to buyers especially first time buyers or buyers who are selling the home they bought 30 to 40 years ago.

Apr 28, 2024 01:45 PM
Sam Miller

Thank You for commenting Leanna!  I see the lack of financial knowledge with first time buyers and also with some of the agents in our industry who haven't studied or compared the different loan programs.  The cost difference between a FHA loan today and a conventional loan over the life of the loan will give most people a heart attack once they calculate the added cost of MIP on the life of the loan - Sam 

Apr 29, 2024 04:30 AM
Lise Howe
Keller Williams Capital Properties - Washington, DC
Assoc. Broker in DC, MD, VA and attorney in DC

am glad that Kathy Streibfeatured this. You make great points About the value of focusing on the best interest rate.

Apr 29, 2024 04:11 AM
Sam Miller

Thanks Lise for commenting!  There can be a significant savings with different interest rates and also avoiding or removing mortgage insurance - Sam 

Apr 29, 2024 04:31 AM
Nick Vandekar, 610-203-4543
Realty ONE Group Advocates 484-237-2055 - Downingtown, PA
Selling the Main Line & Chester County

This is great post, well explained and a good point.

Apr 29, 2024 07:17 AM
Sam Miller

Thanks Nick!  I appreciate your kind comments and hopefully this video and topic are helpful for those who come across it - Sam 

Apr 29, 2024 07:19 AM