Just about everywhere you look these days, there is lots of talk about how we are experiencing historically low interest rates.  It is easy to understand the benefit of this but what does it really mean to you?  If you already have a mortgage, the benefit is that you can lower your existing mortgage payments or shorten your term so you can pay off your mortgage earlier.  For the person(s) looking to buy a home though, logic dictates that lower rates should allow you to qualify for a bigger loan but how much?  Let’s take a closer look at these numbers.

For our example today, I am going to compare the purchasing power of a qualified borrower from today to the last quarter of 2008. We are also going to assume that your income and debt structure has not changed in our window of time either, so we are going to assume that you could still qualify for the same payment today.  30 year mortgage rates at the end of 2008 were right around 6.50%.  For the rate number for today, I am going to use the rate of 4.00%*.  In 2008, if you were qualified to for a loan amount of $200K at a rate of 6.50% you would have a month principle and interest mortgage payment of $1264.14.  With a rate of 4.00%, you would be able to qualify for a loan amount of ~$264K.  That means that your purchasing power has increased over 32%.  This increase in purchasing power applies to all loan amounts too.  If you were originally qualified for a loan amount of $300K you would now qualify for a loan amount of $397K, or $132K if you were originally qualified for a loan amount of $100K.

The point of all of this is that there has never been a better time to buy.  Home prices are stable and starting to increase; lower rates have increased your purchasing power and rents for those still renting have been steadily increasing.  Call The Kunselman Team with Envoy Mortgage today so you can get out there and find your dream home.

*This rate is just for comparisons purpose.  The different factors that go into determining a borrowers interest rate are so many that I don’t want it to seem like this example only applies to a very specific situation.  To determine what interest rate you would qualify for, please contact The Kunselman Team at 303-578-2468.