How improving mortgage rates drive purchasing power

Are you in the market for a new home? You might want to take advantage of the current trend in interest rates. In recent weeks, interest rates have come down by about half a percent, which can mean a significant increase in your purchasing power. If you are pre-approved with a mortgage company and looking for a set purchase price, you might find that you can now afford a higher-priced home for the same payment…

For example, if you were previously capped at a $700,000 purchase price for a 25% down conventional 30-year fixed-rate mortgage loan scenario, and your pre-approved interest rate was 7.25%, you might now be eligible for an interest rate around mid-6 %. This reduction in interest rate might mean that your maximum purchase price is now around $720,000.

This is great news for families who are looking to purchase a new home. The reduction in interest rate can lead to a reduction in your monthly payment, which can make a significant difference in your budget. If interest rates continue to come down, your purchasing power will continue to rise, giving you more options and allowing you to potentially change the type of home you want and even the neighborhood you want to live in.

However, be aware that other buyers also now have more purchasing power, which can lead to a bidding war for the same property, potentially driving the price up. So, if you find a house that you like and can justify the payment, make an offer with your real estate agent. Remember, most purchase contracts these days have contingencies, including loan and appraisal contingencies, that allow you to get out of the transaction if things don’t go according to plan.

In conclusion, the current trend in interest rates can be a great opportunity for families who are looking to purchase a new home. It can increase your purchasing power and give you more options. However, it’s essential to work with a local loan officer and a real estate agent who can help you navigate this process and identify opportunities that can make your home purchase more friendly and effective.

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