With 2019 in full swing, many families are considering purchasing a home this year. If you’re ready to ditch the landlord or if you’re considering purchasing a weekend home on Possum Kingdom Lake, there is a piece of the puzzle you need to keep a close eye on.
Throughout 2018 we saw mortgage rates on the rise. We did see a them go down slightly toward the end of the year, but according to Freddie Mac’s latest Primary Mortgage Market Survey, rates climbed to 4.94% in November before falling to 4.62% for a 30-year fixed rate mortgage. In spite of the recent rate drop, we’re projected to reach 5% in 2019.
Why is this important?
Watching what interest rates are doing is vital when buying a home because this not only impacts your monthly housing cost, but it also plays a factor in how much home you can afford.
To give you a more visual idea, take a look at the chart below. It illustrates how you could be affected if you were to purchase a home for $400,000 while keeping your payments around $2,020 - $2,050 a month. With each quarter of a percent increase in interest rate, the value of the home you can afford decreases by 2.5% (in this example, $10,000).
While 5% might still seem like a good rate to some, overall, we haven’t seen an average interest rate hit this high in nearly 10 years. Instead of waiting until spring like many home buyers, let’s get started on finding you the perfect home now while rates are still low.