Why Waiting to Buy a Home Until Next Year Could Cost YouMany people in the Tampa Bay area are sitting on the fence trying to decide if now’s the best time to buy a home. These include renters
How A Change In Mortgage Rates Can Affect Your Home Purchasing Power
Dated: March 30 2021
How a Change in Mortgage Rates Can Affect Your Home Purchasing Power
Thinking about buying a home? Then it's important to know that mortgage rates are on the rise in Tampa Bay, FL and around the U.S. this year, but they’re still incredibly low compared to the historic average. However, anytime there’s a change in the mortgage rate, it directly affects what you can afford to borrow when you're shopping for a home. As Sam Khater, Chief Economist at Freddie Mac, shares:
“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):
When you're planning on buying a home, it’s important to hammer out a monthly housing 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. It's always best to talk to your Realtor and your lender about what these interest rate changes can mean for your monthly payment and what kind of a budget you're also pre-approved for.
According to the National Association of Realtors (NAR), today, the median existing-home price is $330,000 in Pinellas County, FL and $310,000 nationwide. Using a purchase price of $300,000 as a simple number close to the median price, here’s an example of how a change in mortgage interest rates impacts your monthly principal and interest mortgage payments on a home.If you’re getting ready to buy a home in our area of Florida 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. If your budget allows for the increase, great! But ALWAYS check with your lender. The worst thing that can happen is you may think you've found the perfect home, then your lender tells you that you're not qualified for the higher purchase price.
In essence, it’s ideal to close on a home loan when mortgage rates are low, so you can afford to borrow more money if the need arises. This gives you more purchasing power when you buy a home. Mark Fleming, Chief Economist at First American, explains:
“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 interest rates are still very low, but experts project they’ll continue to rise modestly in 2021. 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.
Thanks to low mortgage rates, the spring housing market's in bloom for buyers – but these favorable conditions may not last for long. Connect with us today at The Sandy Hartmann Group to start the homebuying process while your purchasing power is still holding strong. Call or text us at (727) 400-3315 to get started!
Gabe has been a resident of Seminole and the surrounding Gulf Beaches his entire life. His vast market knowledge of many of the trendiest Downtown and Beach subdivisions in Pinellas County is simply u....
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