When you are qualified for a mortgage, it is based on a certain monthly payment. The mortgage rate is estimated (in addition to other figures such as property taxes and homeowners insurance). Mortgage rate fluctuations impact Waltham MA pre-approval amounts because it impacts the principal and interest part of the total payment. It is important for home buyers to understand this because an increase or decrease in rates will affect home purchase criteria.
Mortgage Rate Fluctuations
Mortgage rates can adjust on a daily basis. At certain times, they can even adjust multiple times on the same day. As a buyer, you will not know what your specific mortgage rate is until you select a home, know the closing date, and lock in your mortgage rate. Thus, there is some uncertainty, particularly for price sensitive borrowers. It is important to find out what mortgage rate was originally used to determine your pre-approval and to keep your pre-approval up-to-date. When mortgage rates are frequently or dramatically moving, contact your lender before preparing a bid on a home to confirm that you are still qualified for the purchase price.
Mortgage Rate Fluctuations Impact Waltham MA Pre-approval Amounts
Monthly payments typically include principal, interest, property taxes, hazard insurance, and mortgage insurance (if your down payment is below 20%). For the purposes of this illustration, we will only look at the principal and interest portion. Assume that a borrower qualifies for a $300,000 purchase price based on a thirty year loan, 3.5% down payment, and 5% mortgage rate. The principal and interest portion of the payment is roughly $1554. If the mortgage rate rises by half a percent, that same borrower qualifies for only $283,638. That is a reduction of over $16,000 in the purchase price, which may be a home with different features. On the other hand, if mortgage rates reduce by 0.5%, the maximum price elevates to $317,843. The table below illustrates the affect of additional changes for this same buyer based on a mortgage principal and interest payment of $1554:
|Mortgage Rate||Principal Amt||Down Payment||Purchase Price|
Understanding Your True Price Limit
You should ask your mortgage consultant about the maximum payment amount for which you qualify. Using this information, you can better determine the feasibility of homes prior visiting them. Keep in mind that there are several figures that the total amount: mortgage rate, real estate taxes, homeowners insurance, and mortgage insurance. If you plan to select a property close to the qualification limit, then it will be very important to watch mortgage rates. Your mortgage officer and real estate broker can assist you with this analysis and provide other details on how mortgage rate fluctuations impact Waltham MA pre-approval amounts.