A national September update on new jobs added to the entire US economy has pushed 30 year and other mortgage rates down even further. Rates for a 30 year mortgage dropped to just 3.76% last week, down from the already-low 3.85% rates we’ve been talking about so much. A year ago at this time, rates were 4.19%.
The national jobs update report tacks onto problems in the stock market caused by instability in overseas markets and other global uncertainties. The Fed has left rates extremely low and have projected no major increases until after 2015 ends.
Why are interest rates so important if you’re buying a home? “The interest rate is your cost of borrowing the money to purchase your home or condo. When you’re dealing with $200,000, $300,000, $400,000 purchases, every percentage point in rate makes a big different in what you can afford to spend on your home purchase,” continued DiRuggiero.
Here’s an example using simple numbers:
- At 3.75% rates, a buyer borrowing $200,000 on a 30 year fixed rate mortgage would pay just $926/month mortgage payment (on principal and interest only).
- At a 4.75% rate, the same buyer can only borrow $177,500 in order to keep their monthly budget at the mentioned $926/month.
“In that situation using simple numbers, the buyer has lost about 12% of their buying power due to the higher interest rate. For someone trying to stop renting and build equity in their first home, the rate swing makes a BIG difference,” said DiRuggiero. When you scale housing prices up to around $300,000, which is average our Workshop buyers are spending, you see a bigger net dropoff in housing affordability. That same 12% drop in buying power gets a lot more painful as you go up in price.”
There are two UrbanLand Co. Buyer Workshops available. We’ll be discussing area $0 Down programs, how to successfully use financing programs to actually purchase a home and win offers, and a whole ton of 0ther useful information including time for audience interaction. Join us on Tuesday night at 5;30pm or this Saturday morning at 10:00am! Email us to let us know you’re coming by!
Learn more about DC’s landmark $0 Down Home Buying assistance program here! You can earn up to $125,580 per year and still qualify for $0 down!