Homes are more affordable today than at any time in recorded history. It’s not only because home prices are down, though — it’s because mortgage rates are. Low mortgage rates extend a buyer’s housing budget farther than falling home prices ever could. But with mortgage rates changing every 4 hours on average, affordability can be short-lived. Every time mortgage rates change, so does your budgeted maximum purchase price. And the changes can be dramatic. Example: For each 0.125% increase to mortgage rates, your maximum purchase price must fall by 1.45% to stay “in budget”.
Tip: Mortgage rates are the biggest factor in home affordability. The lower you can get your mortgage rate, the more homes that you will find that meet your monthly budget. Rising mortgage rates can quickly erase your savings.
Picking the Proper Mortgage Product to Fit Your Needs
Mortgage rates are a major influence on your monthly housing budget, but, they’re outside of your control. Mortgage rates based on the price of mortgage-backed securities; bonds bought and sold on Wall Street. You can, however, control with which mortgage product you finance your home. And, by making better mortgage choices, you can avoid “over-paying” on your home loan.
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