Just how low are rates right now? They are so low, you can buy more house today with the lowest payments ever in history! I was talking with one of my buyers a couple of days ago. She's very concerned about mortgage payment. We've had the same discussion three times, and we go in circles. She's thinking about settling for a house today that is very cheap, and then getting a "better" house in 3-5 years.
Each time it's, "Rates are below 4% today. We don't know what rates will do in 3-5 years. What if you are only able to buy the same price point house at that time because rates increase so much, the payments are out of your reach?" Each time, I get an "Ahhh, I understand..."
Here's a personal example that made my jaw hit the floor. The very first house I bought at age 24 had a loan amount of $134k. Since I was self employed, my interest rate was 7%. At today's rate of 3.75%, to keep the same payment that I received back then, I could have a loan amount of $192,500 today!
That's crazy! I'm thinking, what would a 24 year old do with a $200k house? The average prices in the area are under $200k. That means I would be able to afford a house above the "average".
I thought those numbers were astonishing!! It boggles my mind to think how much the interest rate plays in what people can afford. With the same example above, at a 5% interest rate, I could get a loan amount of $166k and have the same payment. $166k is a considerably different house in a very "different" neighborhood than $192,500 and definitely $134k.
1% here and there makes a huge difference! If you're thinking from the get-go that you'll just buy a "better" house later, think about how much that could cost you if you're able to actually afford that better house now.
**Are You Packed Yet?**
Austin TX Real Estate and the surrounding areas of Lakeway, Bee Cave, West Lake Hills, Cedar Park, Round Rock, Spicewood, Circle-C, Steiner Ranch, and everywhere in between... Hill Country Austin TX Real Estate and beyond. Whether you're buying or selling an Austin home, I'll be with you every step of the way.
* Interest Rates Effect How Much Home You Can Afford * was first published on donnahomesblog.com.