Anyone seriously considering the purchase of a home in 2011 needs to be paying attention to mortgage rates. After hitting a low of 4.32 percent for a 30-year fixed-rate loan in early September, rates have crept up. And the chief economist for the National Association of Realtors, Lawrence Yun, is saying that mortgage rates could rise to 5.7 percent this year and go as high as 6.2 percent in 2012. Now those would still be pretty good rates compared especially with the double-digit rates some of us remember from years ago. But here is a simple formula regarding mortgage rates that Mike Stitt of Summit Funding recently sent me. It makes a powerful point:
“In simple terms, every 1% increase in home loan rates decreases the buying power of an individual by 10% in home price. This means that if you qualify for a home priced at $200,000 today and interest rates increase 1%, the amount you could qualify for would be reduced to approximately $180,000 to maintain the same payment.”
So, again, anyone serious about buying a home in the near future should keep this information in mind in their decision making. all4now
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