While most buyers understand that rates are an essential part of the home buying process, many don't fully comprehend their impact on their home purchases. Currently, rates are at historically low levels, making now a great time to purchase your dream home.
Here are a few tips to help better understand the importance of interest rates and how they can impact your home purchase.Low-Interest Rates Increase Buying Power
With low rates, a buyer's purchasing power increases because the percentage of the payment going towards interest is less, meaning more of the monthly payment goes to the purchase price. Additionally, lower rates open the door to buyers who otherwise couldn't afford a home at the current market prices. The difference between a 3.5% and 4.5% interest rate is significant because the difference in monthly payments for the same loan amount can determine whether a home is affordable to the buyer.Don't Delay Locking in Your Rate
If you are looking to buy a home, locking in low rates can be essential. Rates can fluctuate, and if they increase while you wait, the monthly price of the home you love could also increase.
If you can obtain a loan at a 3.5% rate now, with a monthly payment of $1,908, but decide to wait a year to purchase, your new monthly payment could go up several hundred dollars if the interest rate increases to 4% or 5%.
When you wait to lock in a low rate, what you once could afford might become out of reach, and you could find yourself settling for a less desirable home or needing to delay your home buying decision even longer.
As stated above, lower rates increase your buying power and can even impact your ability to qualify for a home loan. Kindred's preferred lender, HCP Mortgage*, offers competitive rates and can help you determine what you can afford. Additionally, you can find a mortgage calculator on the HCP Mortgage website to help calculate your monthly budget.Ask The Right Questions
As you begin to navigate through your home buying journey, it's a great idea to ask questions and make sure you're getting the answers needed to ensure you're making the best decisions possible. Here are a few suggestions on what to ask:
Now that you understand the basics of interest rates and their impact on your purchasing power learn more about the buying process by visiting our website or visiting HCP Mortgage* to get pre-approved today.