The Cost of Waiting

If buying a home has been on your to do list, the time to act is now. It is projected that in 2019 the interest rate for home loans will rise from 4.99% to 5.49%, and if you’re thinking that a half percent rate increase will not break the bank, you might want to reconsider. We had a chance to discuss the cost of waiting and what this means for prospective homebuyers with our partners at MortgageBanc, the Ben Chenault team.

Travis Mitchell, director of client relations for the Ben Chenault team, tells us that “when qualifying for a mortgage, one large factor is a buyer’s monthly debts in comparison to their income. This is known as their debt to income ratio. This means that the same home purchased today will cost more per month and possibly more upfront as well if purchased after the rates increase… and in some cases, a buyer may no longer qualify for the same home based on that ratio increasing.”

The mortgage team tells us that the Fed has been keeping rates down for a long time as the nation recovered from the recession, but as the country’s economy has shifted, so will interest rates. As these rates climb, so will your payments on a new home loan.

So what does this look like in a real scenario? Let’s say that you want to spend $350,000 on a new home. On a home loan with an interest rate of 4.99%, your monthly payment would be around $1,689 if you were to put $30,000 down. With an interest rate of 5.49%, that monthly payment with the same down payment amount would be $1,925.

There is an optimistic outlook, however. Ben Chenault adds that “while this is concerning for some, it is also important to look at historic interest rates. Interest rates have seen as high as 20%, so when rates possibly hike to 6% next year remember that we are still in a great market. Buying power will decrease next year as rates and home prices increase, but buying power is still fantastic compared to historical averages and should not discourage anyone from getting into the real estate market.”

Are you ready to start your homebuying process? Reach out to an ARC Realty agent today or the Ben Chenault team of MortgageBanc to discuss the pre-approval process.