Changing Mortgage Rates Impact Your Budgets
It was projected that we would see an increase in mortgage rates rise this year. In comparison to historical data, the mortgage rates are still incredibly low (think in the 1980’s it was at 12% and in the 2000’s it was 6.29%) but the interest rate can definitely affect what you can afford when purchasing a new home. Home prices are continuing to increase while interest rates are as well. We still see bidding wars and cash-buy offers, so there is no indication that the housing market will be decreasing anytime soon according to real estate professionals and economists.
Interest rates in the United States are determined by the actions of the U.S. Federal Reserve, the health of the economy and other factors. You’ll need to consider that the cost of mortgages is closely tied to interest rates, the price of the homes sold oftentimes do not directly correlate. It is a fine balancing act.
As we mentioned in previous blog posts, a decrease in interest rates usually allows for your dollar to stretch a bit more depending on your credit score and mortgage rate eligibility. Purchasing a home is not a decision that you take lightly, and your budget is very important. As interest rates increase, the loan amount would decrease in order for you to stay within your budget. Reversely, if interest rates decrease, your homebuying budget would increase.
It is still an opportune time to purchase a home as the rates are still historically low in comparison to previous years. As these conditions are favorable now, it is more crucial than ever to reach out to a local real estate professional to start the homebuying process while your purchasing power is still strong.