How do changing interest rates affect you as a buyer? I’ll go over the answer to that and give you a quick market recap today.
For December, overall sales were up 4.2% from November, and as we ended 2016, the fourth quarter ended 10.2% higher than the third quarter. That was interesting to see, as the fourth quarter is usually not as strong for sales.
Now, let’s talk about how changes in interest rates are affecting buying power. Right now, interest rates are at about 4%, but that may not be your specific interest rate. The interest rate you get depends on your credit score, your income, and your debt ratio.
However, let’s say your interest rate was 4% and your lender had approved you for a loan of $250,000. For every 0.5% increase in your interest rate, your buying power is reduced by 10%. So, if your rate went up to 4.5% and you lost 10% of your buying power, you’d now only be approved for a $225,000 loan.
That is a significant difference. As a buyer you really need to grasp how substantially that affects your buying power. If your goal is to buy your dream home, I promise you the time is now. Every time interest rates go up, your buying power goes down. Now really is the time to take action and I am here to help!
If you have any other questions, please feel free to give me a call or send me a text. I look forward to hearing from you!