As expected, mortgage interest rates have risen. Many consumers understand that a change in rates will effect the cost of buying a home, but few realize the impact it has on your pocketbook.
In January, I posted a blog with a chart that showed the potential impact of rate increases in 2018. Some feedback was, “They won’t increase THAT much this year”. Well as you see above, they did. Those same people that felt it wouldn’t be a big impact are likely regretting waiting to purchase their new home. Let’s take a look at where we were, where we are now, and where we may be heading.
The afore mentioned chart is below, remember this was drafted in January when the “Current Rate” was around 4.35%.
In a simple purchase scenario where the buyers monthly mortgage payment budget is about $1525 per month, a conventional 30 year mortgage at 4.35%, with a 20% down payment would have yielded a purchase price of about $383,000. That was then…what would the purchase price be today at a rate of about 5.1%?
Looking at the same 30 yr mortgage, with a 20% down payment and the intention of keeping the monthly payments in the $1500-1525 range, todays buyer can now afford a total purchase price of approx. $331,800.
That is a difference of $51,200! In order to get the same house, today’s buyer can either increase the monthly budget over $150 per month, or come out of pocket with a larger down payment, north of 20%.
The other option is to just buy less home. So what should they give up? Location, size, a pool, home office, chef’s kitchen? Tough decisions to make there.
So where are we going now? Well, the experts in the industry see more rate increases coming, maybe even by the end of 2018, certainly in 2019. Another 1/2 to 1% increase may just price some potential homeowners out of the market.
My advice, let’s go get your home today! I have great business partners in the lending industry that will work tirelessly for you to ensure that you get the best possible loan terms, and you get into your home before rates increase more.
Call me, let’s chat about your individual situation today.
(602) 818-6065 – Kevin@GiantAgent.com – www.GiantAgent.com