The one thing I’ve learned being in Real Estate is that everyone loves to pretend to be an agent and they’re going to tell you all about interest rates at the next family get-together. I am here to teach you how to be prepared to buy a house, and to be as prepared as the Real Estate Agent you hire. At the end of the day getting the best bang for your millennial buck is the most important goal we achieve today. Also, wouldn’t it be a bonus to school Uncle Larry on mortgage rates at the next family gathering?! We’re all balling on a budget here, so zero dollars will be left behind.
Mortgage rates, what are they? By definition according to google it is “the rate of interest charged by a mortgage lender”. This interest rate is paid as part of your monthly mortgage payment for your home loan. Mortgage rates fluctuate not only daily, but hourly depending on economic changes, world events and mainly the good old Fed (Federal Reserve). The Feds decision when it comes to interest rates are determined again on economic indicators of inflation, recession and other areas that have an ability to effect the economic growth of our country.
So why are mortgage rates a big deal when it comes to Real Estate? Bottom line they effect the purchasing power of the borrower AKA you the Home Buyer. To break this down and give you a visual of what this means for you as the buyer, in 2020 interest rates took an all time low dip into the mid 2% range, banks were essentially giving out free money to purchase a home. They did this to get our world moving again due to the crisis known as Covid. Today at this very moment interest rates are right at about 6.8% that is only IF you have a perfect credit score meaning 740+. If you were a home buyer in 2020 at a 2.5% rate putting 20% down and you had the purchasing power to buy a $500,000 home, today you would have the purchasing power to buy a $300,000 home. That changes the size, style, and quality of your home quite a bit. I say this not to scare you, but to help you understand why people make such a big deal over rates.
Being 100% real with you, mortgage rates will most likely never drop back down to the mid 2%s in our lifetime unless another catastrophic event like Covid happens again. Let us all say a prayer that it doesn’t. In the 1980s mortgage rates hit an all time high of 20%, so historically speaking we are still looking great. What do we anticipate happening within this next year? Really no one has a crystal ball, but I do believe we will start to see a little more stability in the market and with rates. My best advice to you as a home buyer is to not time the market. If you have the money saved and you find your dream home, get the house. Because everyone that tries to time the market never comes out on top and typically ends up regretting decisions they decided to wait on.
Would you let a mortgage rate determine your willingness to purchase a home? Comment below ⬇️
Chelsea, your Millennial Realtor.
