While most buyers understand that rates are an important part of the homebuying process, many don’t fully comprehend the impact they can have on their home purchases. At the moment, rates are at historic levels, even lower than they have been for the last several years. This is important because it makes now a great time to buy a house.
Here are a few tips to understand the importance of interest rates and how they can impact your homebuying transaction.
Low Interest Rates Increase Buying Power
With low rates, a buyer's purchasing power increases because the interest portion of the buyer’s mortgage payment is less, which means that more of the payment can go toward paying the purchase price of the home. Plus, lower rates open the door to buyers who otherwise couldn’t afford a home at the current market prices. The difference between a 3% and 4% interest rate is significant. Why you may ask? Because the difference in monthly payments for the same loan amount can determine whether a home is affordable to the buyer.
Don’t Wait! Lock In Your Rates Today
If you are looking to buy a home, locking in low rates can be essential. Why does it matter? Because rates can fluctuate. If they increase while you wait, the monthly price of the home you love could also increase.
Case in point. If you are able to obtain a loan at a 3% rate now, with a monthly payment of $1,690, but you 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 do not lock in a low rate, what you once were able to afford might become out of reach and you could find yourself settling for a less desirable home or needing to further delay your homebuying decision.
Case in point. If you are able to obtain a loan at a 2.9% rate now, with a monthly payment of $1,474, but you decide to wait a year to purchase, your new monthly payment could go up hundreds of dollars if the interest rate increases to 4% or 5%.
When you do not lock in a low rate, what you once were able to afford might become out of reach and you could find yourself settling for a less desirable home or needing to further delay your homebuying decision.
Qualify For The Loan
As stated above, lower rates increase your buying power and can even impact your ability to qualify for a home loan. Meritage’s preferred lender, MTH Mortgage*, offers competitive rates and can help you determine what you can afford. Additionally, you may use Meritage’s monthly payment calculator to help you calculate your all-in monthly costs.
Ask The Right Questions
Knowledge is power. As you start to move through your homebuying journey, it’s a good 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:
- What types of loans do I qualify for?
- What is the lowest rate I can lock in and what is the corresponding annual percentage rate (APR)?
- How much do I need to put down to qualify for the low interest rate?
- What will my monthly payment be? Will it fluctuate in any way?
Now that you understand the basics of interest rates and the impact they will have on your purchase power, learn more about the buying process by visiting the Homebuyer 101 Guide or by visiting MTH Mortgage* to get pre-approved today.
*By clicking on this link, you will be accessing the MTH Mortgage website. Meritage has no responsibility for the content or administration of this website.