Rates are up .5% since the November election on a bet that Trump policies will be inflationary, and rates are posied to rise more after the next few Fed meetings tomorrow, May 3, and June 14. But as we’ve seen already this year, rates don’t rise in a straight line–they fluctuate wildly as markets try to figure out new economic and policy direction.
If you’re in the market to buy a home when rates move up and down like this, your home affordability is directly impacted. Rising rates increase your monthly budget on a home purchase, which means you have two choices:
1. Accept a higher monthly payment … IF you qualify for the higher payment.
2. Reduce your purchase price.
For example, if got pre-approved to buy a $350,000 home purchase with 20% down before the election, the rate spike of .5% since the election means you’d have to reduce your target home purchase price by $17,000 to keep the same monthly budget you had when you first got that pre-approval.
This measure can make you think you’re doomed to a smaller house or worse neighborhood. Or you can find a way to qualify using the higher rate if you understand how lenders think.
My latest on Zillow this week breaks down your options in simple terms: