How a Change in Mortgage Rate Impacts Your Immediate Homebuying Budget

Dated: March 30 2021

Views: 61

How a Change in Mortgage Rate Impacts Your Homebuying Budget | MyKCM

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 Macshares:

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):

How a Change in Mortgage Rate Impacts Your Homebuying Budget | MyKCMWhen 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.How a Change in Mortgage Rate Impacts Your Homebuying Budget | MyKCMIf, 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 Americanexplains:

“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.

#hybridrealestate #hybridpcs #thehybridexperience

Latest Blog Posts

What Do Past Years Tell Us About The Fall 2021 Real Estate Market?

As you follow the news, you’re likely seeing headlines discussing what’s going on in today’s housing market. Chances are high that some of the more recent storylines you’ve

Read More

The Big Question: Should You Renovate or Move in 2021?

The last 18 months changed what many buyers are looking for in a home. Recently, the American Institute of Architects released their AIA Home Design Trends Survey results for Q3

Read More

Don’t Wait for a Lower Mortgage Rate – It Could Cost You In The Long Run

Today’s housing market is truly one for the record books. Over the past year, we’ve seen the lowest mortgage rates in history. And while those rates seemed to bottom out in

Read More

What Is Causing The Fall 2021 Competitive Real Estate Market?

Some HighlightsToday’s strong sellers’ market is the direct result of high demand and low supply.Low mortgage rates and generational trends have

Read More