
“Today’s mortgage rates are still very low, but experts project they’ll continue to rise modestly this year.”
Mortgage rates are on the rise this year, but they’re still incredibly low compared to the historic average. However, anytime there’s a change in the mortgage rate, it affects what you can afford to borrow when you’re buying a home. As Sam Khater, Chief Economist at Freddie Mac, shares:
“Since January, mortgage rates have increased half a percentage point from historic lows and home prices have risen, leaving potential homebuyers with less purchasing power.” (See graph below):
When buying a home, it’s important to determine a monthly budget so you can plan for and understand what you can afford. However, when you need to stick to your budget, even a small increase in the mortgage rate can make a big difference.
According to the National Association of Realtors (NAR), today, the median existing-home price is $313,000. Using $300,000 as a simple number close to the median price, here’s an example of how a change in mortgage rate impacts your monthly principal and interest payments on a home.If, for example, you’re getting ready to buy a home and know your budget allows for a monthly payment of $1200-1250 (marked in gray on the table above), every time the mortgage rate increases, the loan amount has to decrease to keep your monthly cost in range. This means you may have to look for lower-priced homes as mortgage rates go up if you want to be able to maintain your budget.
In essence, it’s ideal to close on a home loan when mortgage rates are low, so you can afford to borrow more money. This gives you more purchasing power when you buy a home. Mark Fleming, Chief Economist at First American, explains:
“Monthly payments have remained manageable despite soaring home prices because of low mortgage rates. In fact, monthly payments remain below the $1,250 to $1,260 range that we saw in both fall 2018 and spring 2019, but they are on track to hit that level this spring.
Although they remain low, mortgage rates have begun to increase and are expected to rise further later in the year, thus affordability will test buyer demand in the months ahead and likely help slow the pace of price growth.”
Today’s mortgage rates are still very low, but experts project they’ll continue to rise modestly this year. As a result, every moment counts for homebuyers who want to secure the lowest mortgage rate they can in order to be able to afford the home of their dreams.
Bottom Line
Thanks to low mortgage rates, the spring housing market’s in bloom for buyers – but these favorable conditions may not last for long. Let’s connect today to start the homebuying process while your purchasing power is still holding strong.
To view original article, visit Keeping Current Matters.
Two Reasons Why Today’s Housing Market Isn’t a Bubble
Today, there’s still a shortage of inventory, which is causing ongoing home price appreciation.
The Average Homeowner Gained $64K in Equity over the Past Year
In addition to building your overall net worth, equity can also help you achieve other goals like buying your next home.
More Americans Choose Real Estate as the Best Investment Than Ever Before
Your house is also an asset that typically increases in value over time, even during inflation.
Why You Need an Expert To Determine the Right Price for Your House
Your goal is to aim directly for the center – not too high, not too low, but right at market value.
What Does the Rest of the Year Hold for the Housing Market?
Home prices are forecast to keep appreciating because there are still fewer homes for sale than there are buyers in the market.
Why Summer Is a Great Time To Buy a Vacation Home
The first step is working with a local real estate advisor who can help you find a home in your desired location.