I know I have said it before, but I just can't stress it enough: NOW is a fantastic time to buy a home!! Even though we no longer have the homebuyer tax credit in place, we DO have INCREDIBLY low interest rates (not to mention a great inventory of homes)! With interest rates hovering around 4.75%, buyers are experiencing greater purchasing power (read: they can afford more home for the same amount of money)!
Heather Myott from Coldwell Banker Mortgage did a calculation to illustrate what this increase in purchasing power really translates to, and I thought I would pass it along:
For example, if a buyer is purchasing a $300,000 home and putting down 3.5% with an interest rate of 4.75% for a 30 year fixed rate loan, their monthly payment (of principal and interest) would be $1,544.15.
Now, let's pretend that same buyer waits to purchase the same home until rates have increased to 5.75%. The payment (again, principal and interest) for the scenario- $300,000 purchase price with 3.5% down for a 30 year fixed rate loan BUT with an interest rate of 5.75% would be $1,727.16. THAT'S AN INCREASE OF $183.31 PER MONTH!! (Or, $65,000 over a 30 year loan!)
Now, I don't know about you- but I have a pretty serious shopping habit. So, I translate that $183 a month to at LEAST one outfit! (That's an entire wardrobe by the end of the year!) Of course, depending on your lifestyle, you could view this additional $183 per month a number of ways: you could think of it as one week of day care, one month's cable, telephone, and internet bill, a couple of nice dinners out, a car payment (part of all of it), or even vacation money at the end of the year!!
Continuing on with the example, if the buyer wanted to maintain the payment amount of $1,544.15 in an economy with interest rates 1 point higher than we are seeing now (so, 5.75%), they would only be able to afford a $268,000 home- that's a decrease in 11% in the amount of home they are able to afford!!
Bottom line: if you are thinking of purchasing a home, but don't think you can afford the home that you want, you should probably speak to a lender and determine what you can afford, as you might be (pleasantly) surprised. Do you have a specific home in mind? If so, click here for a mortgage calculator to help determine what your monthly mortgage might be.
You can contact Heather Myott at Coldwell Banker Mortgage at (802)238-1704 or Heather.Myott@MyMortgageFamily.com
As always, you can reach me at (802)846-9430 or Jamie@BurlingtonVermontHomes.com
-Jamie Wright, REALTOR
