When your home buying journey enters its last few weeks, it’s finally time to start watching for mortgage interest rates.
Interest rates are one of the three components in your monthly mortgage payment. However, whereas you can choose your own loan size and loan term, interest rates are set by Wall Street and out of your control.
They’re out of everyone’s control, actually.
Mortgage interest rates answer to no one; and, they change all day long, every day the banks are open.
Yesterday’s rates are yesterday’s news. Tomorrow’s rates are completely unknown. Even what happens an hour from now can affect the rate you get for your loan.
Changing interest rates are a difference-maker.
When interest rates fall — even by a little! — it lowers the monthly payment for a house, and that makes a buyer’s loan applications look more favorable.
Falling interest rates can also stretch your home-buying dollar.
If you were comfortable paying $2,000 per month on a house, for example, and that got you a house for $300,000, a drop in interest rates would extend your maximum purchase price and maybe get you one more bedroom or one more bathroom; or, a home with your preferred finishes.
At today’s interest rates, one percentage point drop (+1.00%) increases your maximum home purchase price 11 percent!
This is why buyers should remain semi-interested in today’s interest rates. You can’t predict where rates will go tomorrow, but awareness helps you make better choices with your budget.
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When your lender says, “you have to act quickly” is not some high-pressure sales tactic meant to make you feel fear. It’s the truth.