What Higher Mortgage Interest Rates Mean For Sellers?
What Higher Mortgage Interest Rates Mean For Sellers?
Mortgage interest rates are at 14-year highs as of the writing of this article. For many buyers that means the monthly payments are too high for their budgets to handle based on current home pricing. With this market shift it means that buyers are now in control versus the past where the sellers called the shots. With fewer buyers on the market the sellers need to figure out how to aim their home at the buyers who are ready to buy.
How Is A Mortgage Payment Calculated?
In most cases when home buyers are looking for a home, they are considering the amount they will be paying monthly for a particular home. Monthly budgets by home buyer consider what they spend on car payments, food payments, utility bills, entertainment, and housing expenses. Home buyers want to keep their expenditure outflows less than their income inflows in order to avoid racking up expensive debt. Mortgage lenders calculate the pre-approval amount based on the debt-to-income ratio of the buyer to determine how much home they can afford. So while a pre-approval letter may say a home buyer can buy up to a $500,000 home, the buyer will buy based on what the monthly payment of principal, interest, insurance and taxes will be and how that payment fits within their budget.
A $500,000 mortgage with a 3% interest rate and 20% down payment results in a $1686 dollar a month payment not including taxes and insurance. With that same $500,000 mortgage, 20% down and a 7% interest rate the payment...
