Find Your Buying Power
Learn how far your dollar goes
The difference between 3% and 4% may not seem like my much, but in terms of mortgages it could mean thousands of dollars being saved.* In uncertain times like today, the market usually fluctuates giving those who are prepared a golden opportunity to save big. With COVID-19 disrupting the market, it has caused mortgage rates to plummet to nearly 50-year lows. If you’ve decided that now is the time to buy (you smart cookie) your monthly payments could get you a lot more home.
The Difference Your Rate Makes:
A few percentage points go a long way. To show you just how much, you can see the difference by comparing the average national rate of about 4.5% in 2018 to today’s national average rate of about 3.0%. These numbers assume a home purchased at a price of $250,000 with 20% down and don’t include taxes or insurance.
|Year||Mortgage Amount||Interest Rate %||Mortgage Period||Monthly Payment||Total Cost of Mortgage|
Table reflects approximate national average rates from Freddie Mac as of 9/1/21. Average rates are not advertised rates and are provided for illustrative purposes only.*
If you have a set amount you’d like to spend every month, getting in at a lower rate can give you a lot more buying power to find a place that better suits your needs. See how much difference a percentage point can make below. **
Other Ways To Raise Buying Power
It isn’t all about getting lucky with rates. There are other ways to help boost your buying power with ease and get you ready to buy a home. Here are a few for you:
1. Down Payment Assistance
The idea of 20% down is a thing of the past. For most buyers, (especially first time homebuyers) there are plenty of financial assistance programs that help you with a down payment, taxes, or refinancing your loan – helping your dollar go farther. And private mortgage insurance (PMI) allows many buyers to get a mortgage without putting 20% down. Talk to a mortgage professional to see what they recommend for your situation.
2. Certain Loan Options
There are more options to loans than choosing between a 15-year and 30-year mortgage. If you’re a veteran or have another select job, you could qualify for a loan with low rate options. It’s important to look at all the details just as fixed rate vs. adjustable rate to determine which loan is right for you.
3. Getting Pre-Approved
Getting pre-approved helps with many uncertainties in the homebuying world. Being able to show a seller that you’re serious gives them confidence in your offer. It also shows you your budget for what you can and can’t buy giving you a clear picture of what is possible.
4. Better Credit = Better Options
Finally, some of the most important factors that influence your buying power are your financial history and future. When you get a mortgage, your credit will be pulled, showing loan officers you credit score. This, along with your debt to income ratio and future assets or expenses help your mortgage company determine your rate. Based off of if they like what they see, you could be paying less each month.
With record-low mortgage rates, now is an amazing time to buy or refinance, and we’ve made it easy to estimate what you can afford without talking to a loan officer. However, to get the best detailed answer and finding the best solution for your specific homebuying needs we’d recommend talking to a loan expert.
If you’re looking for more homebuying tips or other ways to stretch your dollar, you can find all the help you need in our resources tab.
This article was originally published 08/03/2020.
* Savings, if any, vary based on consumer’s credit profile, interest rate availability, and other factors. Contact Guaranteed Rate, Inc. for current rates. Restrictions apply.
** Sample ‘future’ rates provided for illustration purposes only and is not intended to provide mortgage or other financial advice specific to the circumstances of any individual and should not be relied upon in that regard. Guaranteed Rate cannot predict where rates will be in the future. Above scenario assumes first lien position, 740 FICO, 20% down payment, 40 day rate lock on a single family home in Illinois and are subject to change without notice. Sample payment does not include taxes, insurance or assessments. Mortgage Insurance Premium (MIP) is required for all FHA loans and Private Mortgage Insurance (PMI) is required for all conventional loans where the LTV is greater than 80%. Actual payment obligation will be greater. Applicant’s interest rate will depend upon the specific characteristics of applicant’s loan transaction, credit profile and other criteria. Not all applicants will be approved. Restrictions apply. Contact Guaranteed Rate Inc. for more information and up to date rates.
Powered by Froala Editor