Most people buy a home because it solves a particular problem for them. They could be relocating, upsizing, or downsizing for whatever reason. Some rely on the interest rate as an indicator for their purchase. The interest rate is the cost of borrowing that money and is an added expense (when not paying in cash) on top of the principal (the actual price one pays for the home).
On top of the Principal and interest there is taxes and insurance when purchasing. These all roll into an acronym PITI. Ultimately the lender you receive the loan from will use your total PITI to calculate the debt to income ratio (DTI), which determines how much money you can borrow.
Most buyers look at the interest rate as an indicator of whether or not they will buy a home. But why?
There are key factors that are uncontrollable for buyers and the amount of interest they pay on the mortgage. I'm not talking about what specific home you want or the income someone makes or even their already realized debt (credit cards, cars, existing mortgage(s), etc.). If your financial goal is to buy a house- the best time to buy is now because it is an investment.
Yes, The current impact of upward movement in interest rates means that you have lower purchasing power and higher monthly payments. These factors can be minimal considering ou can negotiate a lower purchase price and plan to refinance later. Which will be money either directly saved or a future sum of money pending interest rates fall. Which over the 30 year life of the loan is most probable.
If you're interested, and most aren't, you can follow the 10-year US Treasury yield to determine how interest rates react. As bond yields rise due to government spending and inflation, mortgagers raise their consumer rates to maintain profit margins. Immediately as discussed above when interest rates are high it significantly reduces home-buying power. Don't let these numbers deter you from your purchase there are hidden benefits to higher interest rates.
When interest rates are high this reduces the purchase price. If you are already pre approved for a loan the high rates tend to reduce the number of buyers which gives you more power force the seller to lower the asking price. You are not locked into your interest rate forever-the purchase price you are. Meaning when the real estate market cycle comes full circle you will have the opportunity to refinance. Opening possibilities of selling and realizing your equity gained.
I can go into why buyers win more in negotiations but that would be giving away trade secrets and I'm tickled that you have read this far already. So, text me "homebuyer" if you would like to know more how my services can benefit you. 260-221-9673 or clickrobley.realtor
No comments:
Post a Comment