How a Change in Mortgage Rate Impacts Your Homebuying Budget

<article class="post-2078 post type-post status-publish format-standard has-post-thumbnail hentry" id="post-2078"><span class="entry-date">March 30, 2021</span><div class="entry-header center-block text-center"><h1 class="entry-title">How a Change in Mortgage Rate Impacts Your Homebuying Budget</h1><div class="shareBlock"><div class="shareTitle">Share</div><div class="shareIcons"><a aria-label="Twitter Share Link" class="twitter solid display-inline-block" data-tracking="Post,Social Post Link Clicked,Twitter" href="http://twitter.com/share?text=How+a+Change+in+Mortgage+Rate+Impacts+Your+Homebuying+Budget&amp;url=https%3A%2F%2Fgilliggroup.com%2Fblog%2Fhow-a-change-in-mortgage-rate-impacts-your-homebuying-budget%2F" target="_blank"><span class="force-hidden">Twitter</span></a>
<div class="fb-share-button display-inline-block" data-href="https://gilliggroup.com/blog/how-a-change-in-mortgage-rate-impacts-your-homebuying-budget/" data-layout="" data-size=""><a class="facebook solid fb-xfbml-parse-ignore" data-tracking="Post,Social Post Link Clicked,Twitter" href="https://www.facebook.com/sharer/sharer.php?u=https%3A%2F%2Fgilliggroup.com%2Fblog%2Fhow-a-change-in-mortgage-rate-impacts-your-homebuying-budget%2F&amp;src=sdkpreparse" target="_blank"><span class="force-hidden">Facebook</span></a></div>
<a class="pinterest solid display-inline-block" count-layout="horizontal" href="https://pinterest.com/pin/create/link/?url=https%3A%2F%2Fgilliggroup.com%2Fblog%2Fhow-a-change-in-mortgage-rate-impacts-your-homebuying-budget%2F&amp;description=How+a+Change+in+Mortgage+Rate+Impacts+Your+Homebuying+Budget" target="_blank"><span class="force-hidden">Pinterest</span></a>
<a class="linkedin solid display-inline-block" href="https://www.linkedin.com/shareArticle?mini=true&amp;url=https://gilliggroup.com/blog/how-a-change-in-mortgage-rate-impacts-your-homebuying-budget/?shareSlug%3Dhow-a-change-in-mortgage-rate-impacts-your-homebuying-budget" target="_blank"><span class="force-hidden">LinkedIn</span></a>
<a class="email dashicons dashicons-email solid display-inline-block" href="mailto:?subject=From gilliggroup.com: How a Change in Mortgage Rate Impacts Your Homebuying Budget&amp;body=How a Change in Mortgage Rate Impacts Your Homebuying Budget%0D%0Dhttps://gilliggroup.com/blog/how-a-change-in-mortgage-rate-impacts-your-homebuying-budget/" target="_blank"><span class="force-hidden">Email</span></a>
</div></div><div class="post-tax post-category"><span></span><a href="../category/realtor-blog/index.html" rel="tag">Realtor Blog</a></div><div class="post-tax post-post_tag"></div></div><div class="entry-content"><div>
<p><img alt="How a Change in Mortgage Rate Impacts Your Homebuying Budget | Simplifying The Market" class="webfeedsFeaturedVisual wp-post-image" decoding="async" link_thumbnail="" loading="lazy" sizes="auto, (max-width: 549px) 100vw, 549px" src="https://files.simplifyingthemarket.com/wp-content/uploads/2021/03/29130507/20210330-KCM-Share-549×300.jpg" srcset="https://files.simplifyingthemarket.com/wp-content/uploads/2021/03/29130507/20210330-KCM-Share-549×300.jpg 549w, https://files.simplifyingthemarket.com/wp-content/uploads/2021/03/29130507/20210330-KCM-Share.jpg 750w" style="display: block; margin-bottom: 5px; clear:both;max-width: 100%;" width="358"/></p>
<p>Mortgage rates are on the <a href="https://www.simplifyingthemarket.com/2021/03/09/how-upset-should-you-be-about-3-mortgage-rates/?a=712984-fa409495d5d70154d03a25e81e9540e2">rise</a> this year, but they’re still incredibly low compared to the historic <a href="https://www.simplifyingthemarket.com/2021/02/19/home-mortgage-rates-by-decade-infographic/?a=712984-fa409495d5d70154d03a25e81e9540e2">average</a>. However, anytime there’s a change in the mortgage rate, it affects what you can afford to borrow when you’re buying a home. As Sam Khater, <em>Chief Economist</em> at <em>Freddie Mac</em>, <a href="https://freddiemac.gcs-web.com/node/22396/pdf">shares</a>:<span id="more-44101"></span></p>
<blockquote>
<p><em>“<strong>Since January, mortgage rates have increased half a percentage point</strong> from historic lows and home prices have risen, leaving potential homebuyers with less purchasing power.” (See graph below):</em></p>
</blockquote>
<p><a href="https://files.simplifyingthemarket.com/wp-content/uploads/2021/03/29130505/20210330-MEM-Eng-1.png"><img alt="How a Change in Mortgage Rate Impacts Your Homebuying Budget | Simplifying The Market" class="aligncenter wp-image-44103" decoding="async" height="488" loading="lazy" sizes="auto, (max-width: 650px) 100vw, 650px" src="https://files.simplifyingthemarket.com/wp-content/uploads/2021/03/29130505/20210330-MEM-Eng-1.png" srcset="https://files.simplifyingthemarket.com/wp-content/uploads/2021/03/29130505/20210330-MEM-Eng-1.png 1000w, https://files.simplifyingthemarket.com/wp-content/uploads/2021/03/29130505/20210330-MEM-Eng-1-400×300.png 400w" width="650"/></a>When buying a home, it’s important to determine a monthly budget so you can plan for and understand what you can <a href="https://www.simplifyingthemarket.com/2021/02/11/47-of-new-buyers-surprised-by-how-affordable-homes-are-today/?a=712984-fa409495d5d70154d03a25e81e9540e2">afford</a>. However, when you need to stick to your budget, even a small increase in the mortgage rate can make a big difference.</p>
<p>According to the <em>National Association of Realtors</em> (NAR), today, the median existing-home price is <a href="https://www.nar.realtor/newsroom/existing-home-sales-descend-6-6-in-february">$313,000</a>. Using $300,000 as a simple number close to the median <a href="https://www.simplifyingthemarket.com/2021/03/24/why-you-should-think-about-listing-prices-like-an-auctions-reserve-price/?a=712984-fa409495d5d70154d03a25e81e9540e2">price</a>, here’s an example of how a change in mortgage rate impacts your monthly principal and interest payments on a home.<a href="https://files.simplifyingthemarket.com/wp-content/uploads/2021/03/29130503/20210330-MEM-Eng-2.png"><img alt="How a Change in Mortgage Rate Impacts Your Homebuying Budget | Simplifying The Market" class="aligncenter wp-image-44102" decoding="async" height="488" loading="lazy" sizes="auto, (max-width: 650px) 100vw, 650px" src="https://files.simplifyingthemarket.com/wp-content/uploads/2021/03/29130503/20210330-MEM-Eng-2.png" srcset="https://files.simplifyingthemarket.com/wp-content/uploads/2021/03/29130503/20210330-MEM-Eng-2.png 1000w, https://files.simplifyingthemarket.com/wp-content/uploads/2021/03/29130503/20210330-MEM-Eng-2-400×300.png 400w" width="650"/></a>If, for example, you’re getting ready to buy a home and know your budget allows for a monthly payment of $1200-1250 (marked in gray on the table above), every time the mortgage rate <strong><em>increases</em></strong>, the loan amount has to <strong><em>decrease</em></strong> to keep your monthly cost in range. This means you may have to look for lower-priced homes as mortgage rates go up if you want to be able to maintain your budget.</p>
<p>In essence, it’s ideal to close on a home loan when mortgage rates are low, so you can afford to borrow more money. This gives you more purchasing power when you buy a home. Mark Fleming, <em>Chief Economist</em> at <em>First American</em>, <a href="https://blog.firstam.com/economics/the-good-the-bad-and-the-maybe-ahead-of-spring-home-buying">explains</a>:</p>
<blockquote>
<p><em>“Monthly payments have remained manageable despite soaring home prices because of <strong>low mortgage rates</strong>. In fact, monthly payments remain below the $1,250 to $1,260 range that we saw in both fall 2018 and spring 2019, but they are on track to hit that level this spring. </em></p>
<p><em>Although they remain low<strong>, mortgage rates have begun to increase and are expected to rise further later in the year</strong>, thus affordability will test buyer demand in the months ahead and likely help slow the pace of price growth.”</em></p>
</blockquote>
<p>Today’s mortgage rates are still very low, but experts <a href="https://www.simplifyingthemarket.com/2021/02/18/will-low-mortgage-rates-continue-through-2021/?a=712984-fa409495d5d70154d03a25e81e9540e2">project</a> they’ll continue to rise modestly this year. As a result, every moment counts for homebuyers who want to secure the lowest mortgage rate they can in order to be able to afford the home of their dreams.</p>
<h3><strong>Bottom Line</strong></h3>
<p>Thanks to low mortgage rates, the spring housing market’s in bloom for buyers – but these favorable conditions may not last for long. Let’s connect today to start the homebuying process while your purchasing power is still holding strong.</p>
</div>
</div></article>