Austin TX Real Estate - Hill Country Austin Lakeway Homes for Sale: If Rates Go Up - Buying Power Goes Down - Buying a House Today

If Rates Go Up - Buying Power Goes Down - Buying a House Today

Austin TX and the surrounding suburbs is a great place to buy, NOW!  Why?  A few days ago, I talked about how Interest Rates are Down, but I didn't explain it in price of affordability terms.  What do I mean by that? I mean what you can afford today will be vastly different than what you might be able to afford next year if rates go up.

interest rates increase houses for sale austin txFor example, rates are about 4.25% right now. Some lenders are higher and some are lower, and it also depends on your credit scores and credit history, but on average, 4.25% is a good estimate.  Let's say you can only afford and qualify for a mortgage payment of $2000 which is to include taxes and insurance as well.  With today's interest rate, assuming a 5% down payment and a 2.3% tax rate (some areas are upwards of 3% and other areas are downwards of 1.8%), you can afford a home of approximately $295,000.

Let's say rates go up to 5%, which is still fairly low.  To keep that same $2000 a month mortgage payment on a house for sale in Austin TX, you would be looking at a sales price of approximately $277,000.  And let's go one more step and say rates go to 5.5% in a few months, which is, again, still fairly low historically.  To keep the same $2000 a month mortgage payment, you would be looking at a sales price of approximately $265,000.

Is there much of a difference between $295k, $277k, and $265k?  Oh yes there is!  There could be a difference of a newer home, a larger lot, a better view, maybe a pool, probably a fourth bedroom AND a study instead of one or the other... possibly a Gameroom AND a Media room instead of one or the other.

And, if rates happen to jump up to 6%, you're looking at a mere $256,000... your buying power goes down and down...

**Note, these examples do not include mortgage insurance that you would have for putting down less than 20%.

The price difference could also potentially mean one school district over another if you're trying to get into a "better" area.  You might be keeping that same $2000 a month mortgage payment, but what does that $2000 a month get you? What are you looking for in a home for sale in Austin TX?  Contact me today, and I can help you figure it out!

**Are You Packed Yet?**

donna harris Realtor Austin TX blog

Donna Harris, REALTOR®
RE/MAX Austin Skyline
www.DonnaHomes.com
Donna@DonnaHomes.com
austin-texas-homes-for-sale.com

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. 

For real time Austin TX listings,click here.

** Multi-Million Dollar Producer Year after Year **

Copyright© 2011 By Donna Harris, All Rights Reserved. You may re-blog with links back to this post.
*
If Rates Go Up - Buying Power Goes Down - Buying a House Today * was first published on donnahomesblog.com.

Comment balloon 6 commentsDonna Harris • October 17 2011 07:14PM

Comments

Great post Donna, thanks for sharing! Definitely valuable information.

Posted by Jen Giraud (American Home Shield) about 7 years ago

I've been working with a young couple for a loooong time.  They wanted more home than they were willing to spend on one and they were getting really frustrated.  With these great rates they were able to buy a more expensive home but not feel the pain in their monthly payment.  They got 3.875%.  :o)

Posted by Ann Allen Hoover, CDPE SRES ASP e-PRO Realtor - Homes for Sale - AL (RE/MAX Advantage South) about 7 years ago

Jen, You're welcome!

Ann, That's great that they got such a low rate!

Posted by Donna Harris, Realtor,Mediator,Ombudsman,Property Tax Arbitrator (Donna Homes, powered by JPAR - TexasRealEstateMediationServices.com) about 7 years ago

Great information here, Donna.  You hit the nail RIGHT on the head!

Posted by Faith LaRosse, Serving Berks, Chester & Montgomery Counties (Springer Realty Group) about 7 years ago

Eloquently written and so true. The rates make a huge difference.

Posted by Ellie McIntire, Luxury service in Howard County & Catonsville (Ellicott City Clarksville Howard County Maryland Real Estate) about 7 years ago

It's a shame that more agents don't educate their buyers on this very thing.  I have also pulled a sale together when you point out to the sellers how VERY LITTLE that extra amount the sellers want for their house will cost them per month

Posted by Bill & Cyndi Daves, TeamDAVES - Your REALTORS In the GA/NC Mountains! (Hiawassee, Young Harris, Blairsville, Hayesville, Murphy and Beyond!) about 7 years ago

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