There’s no denying that low mortgage interest rates have made it possible for tens of thousands of buyers across Orange County to realize the dream of home ownership over the last three years but as we get closer to the fall many economists are predicting that rates will increase.
As of August 2015 mortgage interest rates are still near 4 percent but by this fall they are expected to increase after the Fed increases their rates.
How Do Mortgage Interest Rates Affect Buyers?
Let’s say that you plan on buying a home in Southern California in the coming months and that home costs $300,000.
If you wait 6 months to buy a home and mortgage interest rates increase to 5 percent you could end up paying $120 to $145 more per month for that $300,000 home.
The long term impact of waiting to buy that $300,000 home is that you will end up paying about $100,000 more over the lifetime of a 30-year loan when mortgage interest rates increase by just 1 percent.
Don’t Wait To Buy a Home, Act Now
Although the Federal Reserve has been saying for months that mortgage interest rates will increase, the reality is that we are closer to future rate increases then anyone thanks due to a strong economy, more people working and solid growth in the Real Estate market.
Before applying for a mortgage loan make sure you do the following:
- Create a budget and figure out the maximum amount of money you are comfortable paying for your mortgage loan each month. Typically the suggested amount is between 25-35% of your take home pay.
- Obtain your 3-in-1 credit report to verify the accuracy of your credit reports, correct inaccurate information and more.
- Pay off debts like student loans and credit cards since this will also lower your debt-to-income ratio.
- Save at least 20 percent for a down payment on a home since this will also help you to get a lower mortgage interest rate and keep you from paying Private Mortgage Insurance.
Contact Fred Sed & Associates
To learn more about how mortgage interest rates affect you, or to view homes for sale across Southern California, contact Fred Sed & Associates today by calling us at (949) 272-0125.