THE LOW DOWN ON LOW INTEREST RATES
Over the past 52 weeks, average 30 year fixed mortgage rates have varied from a high of 4.15% all the way to recent lows of 2.91% (mortgagenewsdaily.com). While most buyers understand that lower interest rates are a good thing, most don't realize how much historically low interest rates can affect buying power. To illustrate, let's explore an example. Let's say a buyer wanted to keep monthly payments at or under $2,600 per month. If that buyer was searching for homes when interest rates were highest, the max budget would be $410,000, assuming a 4.15% 30 year fixed rate mortgage, 20% down payment, homeowners insurance policy of $1,800 annually, and 2.5% annual tax rate. That same buyer could increase the max budget to $450,000 when interest rates dropped to 2.91%, everything else equal. See a breakdown of the monthly costs in both scenarios below. They would have to pay a little more down, but the difference in purchase price could make a big difference in the type of home you are able to purchase. For more information on the budgeting costs to purchase a home, click here.