You may have heard that interest rates are beginning to tick up a little bit, and you may be wondering how this will affect you as a homebuyer in the Wilmington market.
On average, every half-point that interest rates rise equals a 4% to 5% loss in purchasing power for buyers.
A conventional loan is based on your debt-to-income ratio, and conventional loans lend up to 45% of your debt-to-income ratio. If you can afford a $1,200 monthly payment on principal and interest with a 20% down payment, you could afford a house up to $295,000 with an interest rate of 4.5%.
If that interest rate ticks up to 5%, that same $1,200 monthly payment only gets you a loan of $216,000 because more of your monthly payment will be covering that higher interest rate on the loan. Your purchasing power actually decreases by 20%.
Ultimately, if you’re thinking of buying a new home, now may be a good time to get off the fence and make your move before rates increase even further. Just give us a call or send us an email. We would be happy to help you!
