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Mortgage Rates And Your Home Purchase
Dated: May 10 2022
Planning on buying a home in Lubbock in the next few months? If so, it’s 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 we’re 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. Let’s 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):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
You will always hear me speak of how important it is to have a mortgage lender that will walk with you through the home buying purchase. Many times there are a few adjustments a buyer can make that allows for credit score or other factors to increase buying power. Together, your lender and I can help you around many of the pitfalls. First, It’s critical to keep your budget top of mind as you’re searching for a home. Let's create a plan that takes rising mortgage rates into consideration and look at your budget based on where rates are today and craft a strategy so you’re ready to adjust as rates change.Bottom LineEven small increases in mortgage rates can impact your purchasing power. If you’re in the process of buying a home, it’s more important than ever to have a strong plan. Partner with a trusted real estate advisor and lender to strategize so you can achieve your dream of homeownership this season.
As a Realtor, my first priority is to make my clients happy. I listen to my clients wants and needs to achieve the best outcome in every transaction and I strive to ensure that the home buying or sell....
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