If you are wondering whether the today’s low mortgage rates make a difference, consider this: a 1 percent increase in your mortgage interest rate is the equivalent of a 9 percent increase in the price of the home you are trying to buy.
In other words, a mortgage rate increase from 5 percent to 6 percent would raise your monthly principal and interest payments by the same amount as a price jump on a $200,000 home to $218,000 home.
You can also look at it this way: a 1 percent increase in the mortgage rate decreases your buying power substantially. For example, a borrower with an income of $3,850 per month (with no debts) might qualify for a $200,000 loan at 5 percent, but only about $180,000 at 6 percent.
Today’s mortgage rates are hovering below 5 percent, and an increase of as little as 1 percent can make a big difference not only in what you pay but also in the amount of money you can borrow.
Current rates matter most
When you are applying for a home loan, regardless of whether you are buying your first or refinancing your existing home, it is important to track mortgage rates so you can lock in a low rate.
Following trends in mortgage rates can give you a point of reference so you can compare loan products, but for borrowers, the most important numbers are mortgage rates today and predictions about where mortgage rates are headed.
