It seems almost inevitable: the Fed, in an attempt to cool the economy just enough to ward off inflation, is likely to raise interest rates. While they will be raising the rate they charge member banks to borrow funds, the impact will be felt by home buyers in the form of higher mortgage interest rates.
Let's face it: we've been living a charmed existence for a few years. Mortgage interest rates have settled in at record setting lows in the 3% to 4% range. Unfortunately, many home buyers did not take advantage of this 'window of opportunity,'and elected instead to sit on the sidelines waiting for something better. I fear they may have waited too long, because when interest rate rise, affordability falls . . . and consumers can afford less home then they did just a few weeks earlier.
Let's do a real world example, shall we? Here is our listing at 3016 Rivercross Rd. in High Point. It's a great one level, recently renovated, brick home with 9'ceilings, priced at $249,900. Buying this home today with a 10% downpayment and 30 year fixed rate interest at 3.89% would mean a monthly principal and interest payment of $1,060.
If that were the largest payment you could handle and we were to realize a 1/2% increase in rates, this home would be out of the question. You'd have to start looking for something in the $235,000 range. 1/2% increase in rates cost you almost $15,000 in house!
If the interest rate increase were to come in at 1%, you'd have to further drop your target price to $222,000 - $28,000 less house than you could buy today!
If you are becoming uncomfortable, good! This is not the time to sit on the sidelines while rates rise! They are projected to increase a full percentage point by the end of the year! If you wait, you will be looking at much less house than you could be buying today!
As always, we at The Vincent Group at GreatNest Traid Realty have access to all of the homes listed in the area and pride ourselves on our real estate financing expertise. There is no better partner to have when you set out to find your dream home before the rate hikes begin. Call us now and start looking at the best homes you could afford today.
GreatNest and The Vincent Group is a full service real estate company charging a low set fee instead of a percentage commission. We serve buyers and sellers in Greensboro, High Point, Winston-Salem , Summerfield, Oak Ridge, Jamestown and surrounding areas. You can reach us at (336) 790-5210 or by emailing Steve Vincent. Visit our website: greatnest.com.