How interest rates affect you as a home buyer
As always this is one of the most confusing parts for home buyers to understand. Which is reasonable because it's very confusing so I want to simplify the process for all of you. There are a lot of different fees that go into the purchase of a home so before you get too hung up on the interest rate you are being charged, it's important to look at all of the other fees collectively. That's the only way you will truly get a clear picture of the cost of purchasing your home.
If you been pre-approved for $1000 a month payment of just principal and interest. This is not including taxes, monthly association fee or insurance.
- At a 4% interest rate, you will be approved for a loan of $206,000, 4.147% APR
- At a 4 1/2% interest rate, you will be approved for a loan of $194,000, 4.656 % APR
- At a 5% interest rate, you will be approved for a loan of $183,000, 5.166% APR
All of these figures are based on the assumption that you are putting 20% down to purchase the house. So depending on the loan that you choose,
these factors will change. So by looking at the examples you can see that is the percentage of the interest rate rises your purchasing power decreases. If you look at a 4% interest rate versus a 5% interest rate, that 1% makes a difference of over 10% in your purchasing power. I would consider that very significant.
Just writing this blog shows why purchasing a home sooner rather than later is a great reason to buy a home right now. No one has a crystal ball nor can they predict the future. Anything could happen, rates could go up tomorrow or they could go down. The one thing we know for sure is at this moment you can get the current rate that's available which is the lowest possible.
This blog is meant as an example to explain interest rates and your purchasing power. I am not saying in any way shape or form that you can secure a 4% interest rate or any other interest rate on a home purchase. For accurate information please talk to a loan officer about your situation, what you can afford and the interest rate that you can get on the purchase of a home.