Mortgage Rates & Buying Power – Guest Post by Tom Begley

    Hot off the press! Many people are asking me about how interest rates effects their buying power. I had Senior Mortgage Advisor, Tom Begley, from Coldwell Banker Home Loans weigh in.

    From Tom:
    “I often get asked by potential homebuyers what impact interest rates have on their buying power. The answer is that it is hard to see the impact when rates fluctuate day to day but it is easy to see the impact over an extended period of time. Case in point was the steady increase in rates that we saw from March to December of 2013. Average interest rates increased from 3.5% to 4.5% which raises the payment on a 300k loan from $1347 (principle and interest) to $1520 (principle and interest). This is a 12.8% increase to the monthly payment. This increased combined with the tightening of mortgage standards decreases a potential homebuyers buying power by that same percentage. In the past lenders had greater flexibility to go over their recommended debt to income limits and approve buyers willing to pay the higher payment. Now with the tightening of the mortgage standards there is less flexibility and for these homebuyers to buy they would now need to put more money down or look at a cheaper house. The rates have dropped since the beginning of the new year (current 30 year average rate is 4.25%) so buyers have temporarily gotten back some of their buying power and they are now eager to buy.”

    Thomas A. Begley
    Sr. Mortgage Advisor
    Coldwell Banker Home Loans
    President’s Club 2012, 2011, 2010 and 2009
    NMLS # 272434
    Direct/cell – 973.474.7734

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