Mortgage Rates Are Rising Fast! What Does That Mean For How Much You’re Qualify For?

 

My Qualification

We’re hitting on an era right now where interest rates are going up. All the great real estate forecasters are calling for a strong economy with rising housing prices and rates. You might be saying to yourself, well, “What does that mean to my qualification?”

The higher the interest rate goes (as long as your income stays the same) the amount you’re qualified for will go down. However, sometimes there are ways around that if you have a few bucks. Let me explain how. Let’s say you have an approval for a $300,000 loan from three months ago. Because interest rates have gone up in the last three months, your approved amount has dropped to approximately $270,000.

However, if you want to still buy a house for $300,000, the way we get around is to pay a couple of points.

A point is exactly 1% of the loan amount. A $300,000 loan @1% is $3,000. If you pay 1 point, your interest rate will be dropped approximately .25% (1/4%) That would lower the payment by about $30. That adds about $15,000 to how much you are qualified for. So by paying a point, you would not be approved for $285,000.

What if you paid 2 Points? (that would be $6,000 in this case) Your rate would go down about .5% (½%.) Now you have approved for $300,000 again!

The lower the interest rate, the lower the payment, which increases how much you can qualify for.

If you have the money AND you plan on keeping the home for a long time, buy the interest rate down. It’s going to cost you some money to do that, but it gets you the house you want and at a lower payment.

Call me, Chris Trapani I’ll help you evaluate it and then I’ll help you Fire Your Landlord®

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