Mortgage rates are on the rise and home buyers and home sellers in Western Massachusetts need to know what the changing rates mean to their buying and selling power.
Let’s take a look at a specific example in a post that I wrote for Masslive.com:
Susie Buyer wants to purchase a $200,000 house. Her current loan is set at 5% with $10,000 down over 30 years. Her monthly payment is approximately $1,230.
She waits on making her purchase and interest rates rise to 6% changing her monthly payment to $1,350.
Now, you may say to yourself, “well, that is only $120 a month, not a big deal”. However…this change will affect her debt to income ratios and in many cases will reduce her buying power. It is very possible that Susie will now have to reduce her purchase level to $184,000 or lower to meet her guidelines and keep the monthly payment at about $1,230. Now I think we can all agree that $16,000 or more is pretty significant.
Susie qualifies for less home, which will surely be disappointing to her when she starts to comparison shop, but is also significant for home sellers.
When rates go up the pool of buyers who qualify to purchase your home goes down.
What can you do about it?
Buyers can get qualified now and lock in their rate for as long as possible.
Sellers can make sure that their home is priced competitively to attract as many qualified buyers as possible.
The important thing is to understand that 1% is more than you think.