Key Takeaways:
- There is no better time than now to borrow money for your new home, especially with mortgage rates on the rise.
- Because mortgage rates and homebuyer purchasing power going hand-in-hand, even the slightest increase in mortgage rates impacts your home-buying budget.
- If you’re wondering how you’re going to afford your new home in the Triangle, contact Linda Craft & Team at 919-235-0007 to discuss your options.
A Little Goes A Long Way
Although mortgage rates are slightly increasing this year, they’re still remarkably low compared to historic averages. However, even the smallest change in mortgage rates affects how much money you need to set aside for your new home. With mortgage rates and home prices on the rise, now is the time to learn more about the relationship between rates and your home-buying budget.
At this rate…
Mortgage rates have increased just half a point since January, yet this slight increase has made a big difference for many prospective homebuyers. It’s important to understand that mortgage rates and homebuyer purchasing power go hand-in-hand. For instance, every time the mortgage rate increases, the loan amount has to decrease to align with your predetermined monthly budget. Therefore, it’s ideal to purchase a home while mortgage rates are lower so that you can afford to borrow more money.
Your monthly budget matters most
It’s easy to look at mortgages from a high level when you constantly hear things like “30-year fixed rate” and “adjustable-rate mortgage.” However, if you want to know if you can actually afford a home, you have to boil the mortgage down into monthly payments. The reality is that finances primarily operate on a month-to-month basis, so you have to determine how much of your monthly budget you can allocate toward a house payment.
As a homebuyer, you want the most power possible in your hands
As mortgage rates start to increase, affordability for buyers comes into question. The median existing home price is $313,000, according to the National Association of Realtors. With this finding in mind, the NAR used $300,000 to show how a change in mortgage rate affects a home’s monthly principal and interest payments:
If you’re working with a monthly payment of $1200-$1250 (shown in gray on the table above):
- Your preferred loan amount decreases by thousands of dollars due to just a quarter of a percentage point increase in mortgage rate.
- You’re going to have to look for lower-priced homes to stay within your monthly budget as mortgage rates go up.
Buy a Home Within Your Budget With Linda Craft & Team
At Linda Craft & Team, we have plenty of homes available to fit a wide range of budgets. As the top real estate team in the Triangle, we are eager to put the home-buying power back in clients’ hands! Contact us today at 919-235-0007 to act quickly and make your next move as mortgage rates rise.