What’s Happening in the Markets and How Does it Affect Me?
In recent months, the bond market has been strong, which led to record low mortgage rates. Recently, however, money started shifting more in the direction of the stock market. This is due, at least in part, to financial reports that were better than expected. These reports include the jobs report for the month of August, as well as a report on consumer confidence.
This is great news, right? It depends on where you choose to invest your money today. Good financial reports often lead investors to move their money out of the more secure bonds and put it in the less predictable stock market to take advantage of any possible gains. This shift leads to a lower demand for bonds and a subsequent decrease in price.
Are Home Mortgage Rates Going Up?
What do bond prices have to do with home mortgage rates? When bond prices go down, home mortgage loan rates go up. Improvements like this to the overall economy greatly impact home loan rates. They begin to increase in anticipation of increased consumer spending. Consequently, when home loans start to increase, they usually do so dramatically. The falling prices of bonds and rising prices of stock could mean a rebound in the housing market and an end to the low rates we have enjoyed for the last several months.
How Can I Determine How Much House Payment I Can Afford?
When you buy a new home the amount of the monthly payment is certainly one of the most important factors to consider. Experts say you should allocate no more than 30% of your gross income towards a house payment.
Interest rates are the riskiest aspect of home affordability today. Home loan rates are the lowest they have ever been but will not stay low forever. Some believe home loan rates are lower than they should be. What this means for the home buyer is you can purchase more home than you may recognize. Do the proper amount of research to see just how much of a home loan you may qualify for before the rates go up and you miss out on some great home deals.
Is There a Simple Formula to Help Me Know How Much I Qualify For?
The only way to know for sure how much of a home loan you can receive is to consult a lending institution or a mortgage broker. Once you are qualified, you can watch the interest rates and adjust your amount accordingly.
For every 1% increase in home loan rates reduces your buying power by 10% in your home price. Simply, this means that if you qualify for a home priced at $200,000 today and home loan rates go up by just 1%, the loan amount you are eligible to receive drops to $180,000 to keep the same payment amount.
The housing market is an exciting place to be today. But, it’s important to understand exactly how much home you can afford so you don’t buy more or less house than you need. While interest rates are at an all time low, there are predictions it won’t stay that way for long.
