Buying a Home, Four Daughters Real Estate, Mortgage Journal

How rates can impact your offer

Week and a half into September and the market is still showing signs of positive buyer traffic. With properly priced properties receiving multiple offers, it may be the shortage of inventory, or just the final push to buy a home before New Years Eve arrives. For many, however, it is the fear that the increasing interest rates will increase, and possibly even jeopardize the new purchase.

Earlier this week rates fluctuated about an 1/8 -1/4 of a point. Although on mortgages between $200k – $300k this only signifies an approximate $30/month increase, however people at the peak of their pre-approved amount or buyers in a multiple bid situation wanting to be aggressive, this $30/month may mean a $6000 purchase price reduction on the offer.

In the example below the buyer based on their PITI only qualifies for a mortgage payment of $1778/month. (PITI = Principal + Interest + Taxes + Insurance). Note the purchase price impact on the rate difference from 5% to 5.25%.  (Click to enlarge image. May be a pop-up)

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If this home with this PITI was listed for $244,900 and the buyer was hoping to offer $250,000, but only qualifies for a $1778/m payment, the highest your offer can be is $243,000.

Please note, this is explained for educational purposes only, and we are not mortgage lenders. For lending questions specific to your purchase you should consult a mortgage lender. The Realtor portion of this post is to display the mathematical changes we need to make in order to help you remain competitive, while making sure you do not cross over the monthly lender approval amount.

Four Daughters Real Estate has made it a policy to  encourage home buyers to research homes based on a monthly budget, and not on the purchase price. PITI fluctuates from home to home impacting your bottom line. Naturally, when you think “resale”  or run comparable values, purchase price is highly relevant, but after the closing, it’s the monthly mortgage bill that will matter most.

If you were impacted by an increase in rate while purchasing a home, please consult your mortgage lender, as there may be ways to bring the payment down and still help you qualify and get your new home.

Mario Bilotas, Four Daughters Real Estate

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