Tag Archives: buying power with mortgage rates

One of the Best Moves You Can Make Before Buying Your Next Home

The time has come for you to find your next home. There are plenty of points on a to-do list that you’ll check off. You’ll find the right agent, choose your perfect neighborhood, and make a list of the features you want in a home. All of these are great steps!

While the best move you can make toward your next home purchase may not sound extremely exciting, but it’s arguably one of the most important.

Get preapproved for your home loan.

Today’s market is becoming more and more competitive. Buyers are learning they need to stand out. Often, multiple buyers will vie for the same home. Mortgage preapproval gives you, as a buyer, an edge.

Preapproval shows sellers that you are a serious buyer. It can make your offer stand out from other, less serious, potential buyers. It shows that you have done the work and secured the money to move forward with a purchase.

Not only will preapproval give you an edge as a buyer, it can also give you a more realistic idea of your home budget. Knowing exactly how much money you’ll be able to spend on a home will manage any expectations you have going into the home buying process. It can eliminate wasted time viewing homes that are outside of your actual budget.

In order to start the process of preapproval, you’ll need to decide upon a lender. By working with experienced agents like us here in The Silva Group, you can get matched with a tried and trusted lender. Seeking out a lender is a scary prospect for most people, and working with your agent’s trusted lender can give you some peace of mind.

A lender will determine just how much money you’re preapproved for by looking at the 4 C’s: capacity (if you’ll be able to make payments), capital (what you have that can translate into cash), collateral (the type of home you’re looking to buy), and credit (your credit score). These factors are the equation a lender will use to determine what type of mortgage you can qualify for.

Once you’ve got your preapproval in hand, you can set forth on the more exciting parts of the home buying process. You will have confidence that many other buyers won’t have. You’ll be able to walk into homes knowing exactly what you can and cannot spend. It will speed up the process and make you more attractive to sellers.

Preapproval may not sound exciting at first, but it is arguably the best move you can make to start the exciting process of your next home purchase.

How Much Did Waiting To Buy Really Cost You?

If you are waiting to buy a home in the hopes that home prices will get cheaper or that mortgage interest rates will drop even lower, then you may have missed the time.  Home prices have been steadily increasing and so are mortgage interest rates.  At the end of 2016 the Federal Reserve raised key interest rates and they are expected to do so three more times in 2017.

As mortgage rates increase, your buying power lessens. For example, let’s say your budget is $1,200 a month towards your housing expenses and you have a 30-year fixed rate mortgage of $250,000 at a rate of 4 percent you could expect your monthly payment to be $1,194. Now, let’s say interest rates creep up to 5 percent which would mean a monthly payment of $1,208 for a loan of $225,000. That means a 1 percent increase in rates decreases your buying power by $25,000 or essentially 10 percent.

Here is how much you lost not buying a home in 2016!

In January of 2016, we saw mortgage interest rates at 3.97 percent to start the year off. Mortgage rates started dropping in April where they held relatively steady till the end of August, then they started to trend upwards and continue to do so today. If you had bought a home in early July when mortgage interest rates dropped to 3.41 percent, your monthly mortgage payment on a 30-year fixed rate loan of $250,000 would have been approximately $1,110 a month. Now if you were to purchase a home at the end of December when mortgage rates reached 4.32 percent( a 33 month high), your monthly payment on your 30-year fixed rate loan of $250,000 would have been $1,158. Once again, that doesn’t seem like a big monthly increase, but it decreases your buying power to only affording a home of $233,000. Waiting just 5 months cost you $17,000.

What does this mean for you?

It means don’t wait any longer. Meet today with one of our preferred vendors and start the process of getting pre-qualified for a mortgage loan.  Interest rates are forecasted to reach as high as 4.6 percent on a 30-year fixed rate mortgage by year end.  To see for yourself how much less your buying power is as interest rates increase use our Home Affordability Calculator.

Here is a break down by county for 2016 on the average sold price and the difference it would cost you at the interest rate lows of 2016 to the highs of 2016.

County Average Sold Price For All of 2016 2016 Low Rate of 3.41%  full price loan monthly payment End 2016 Rate of 4.32% full price loan monthly payment
Delaware $379,864 $1,686 $1,884
Montgomery $319,702 $1,419 $1,585
Chester $391,567 $1,738 $1,942
Bucks $370,748 $1,646 $1,839
Berks $171,472 $761 $850
Philadelphia $358,657 $1,592 $1,779
Greater Philly area all counties $279,765 $1,242 $1,387

So far this year, a $250,000 mortgage now costs you $110 more a month then it did in early November of 2016.  Don’t wait till mortgage rates get higher to buy.  For more information about buying a home and to use our mortgage calculator visit here.

The Silva Group would love to help you with all your real estate needs in 2017. We are comprised of the Philadelphia area’s best and brightest in the real estate industry. It would be our pleasure to help you buy or sell a home. Contact us at any time or feel free to call us directly at (267) 202-7400.