How does the interest rate on a mortgage affect my homebuying power?
First, you should understand that the higher your mortgage amount, the more the rate could affect your homebuying ability.
In an article by smartasset (TM), it notes that a 0.5% rise in interest rates can raise your monthly payment by $28 per $100,000 of loan.
They have a good example in their article, that if you were looking at homes priced at $350,000 when rates were 3.5%, then you should look at houses in the $325,000 price range when interest rates are 4.0%. Rates have risen since that article – so going on the same correlation, with rates at 4.5%, you should look at homes around $300,000. That is a big drop for the same payments!
Now, this doesn’t mean it isn’t affordable to buy a house, this is just a demonstration as to how much your buying power may be affected by the rise in interest rates.
If you are considering buying a home in Baltimore, please contact me, and I can put you in touch with one of the lenders I trust so you can learn what your homebuying power may be – at different interest rates.