The is a relationship between mortgage rates and purchasing power. The lower the mortgage rate, the higher your purchase power. Rising mortgage rates will increase your monthly payments.
According to Freddie Mac, the average 30-year fixed mortgage rate is above 5%. Professionals in the industry are saying that they are more than likely going up. If you are thinking of purchasing a home, now is the time before your purchasing power is too impacted.
Your mortgage rate will determine how much your monthly payments will be which in turn shows how much home you can afford. For example, if your monthly mortgage payment is between $2,100 – $2,200 with the current mortgage rate, you would be able to purchase a home for over $400,000. If the mortgage rates were to increase to 5.75% you would be looking at a house between $360,000 to $380,000.
“Get preapproved with where rates are today, but also consider what would happen if rates were to go up, say another quarter of a point, . . . Know what that would do to your monthly costs and how comfortable you are with that, so that if rates do move higher, you already know how you need to adjust in response,” says Danielle Hale, Chief Economist for realtor.com.
If you are ready to purchase, find a trusted Realtor and mortgage lender who can help you through the buying process. Remember, mortgage rates are predicted to be rising, which will impact your purchasing power.