Your home undoubtedly will be the biggest purchase of your lifetime, so figuring out how much house you can afford is one of the first steps you need to take ensure that you are making the right purchase on the right home. With historically low interest rates, the good news is that you can get a lot more for less.
This past month, interest rates fell the lowest in almost 50 years. As of July 16, 2020, the average rate on a 30-year fixed mortgage fell to 2.98%. Yes, that’s right, 2.98%! What does that mean for home buyers? It means you can get a lot more home for less.
Low Interest Rates are Helping Home Buyers Get More for Less
How Do Interest Rates Affect How Much House Someone Can Afford?
Locking in on a lower interest rate means you will have a lower monthly payment. As a rule of thumb, when interest rates decline, borrowing becomes cheaper, making large purchases more affordable. These include auto loans, credit card expenses, and–yes–home mortgages. According to Investopedia, the Federal Reserve lowers interest rates in efforts to increase economic growth, as lower financing costs can inspire investing and increase borrowing. When interest rates are high, it reduces the amount of money you will be able to borrow; thus, the amount of home you will be able to buy is much smaller.
So How Much House Can I REALLY Afford?
Obviously, there are numerous factors that impact how much house you can afford. The amount of cash you have available on hand to place on your down payment will be a major contributing factor on your monthly payment. In addition, personal income to debt ratios can be complex as well as your stability in earning income longterm should also be considered. Here’s a fantastic FREE mortgage calculator for you to utilize to help assist with your budgeting.
Still not sure how much house you can afford?
For over 50 years, Zukin Realty has been the premier realtor in West Chester, PA. If you would like to find the perfect home for sale in West Chester PA or throughout Chester or Delaware County for you and your family, contact one of our brokerage agents today.