The housing market could see a rise in mortgage rates during the next several months, which could have an impact on the financial ability of some people to buy a home or refinance a mortgage.
The mortgage market group at Fannie Mae provides analysis of current and historical data, and forecasts economic trends in the housing and mortgage finance markets. Their economic outlook for 30 year fixed mortgage rates predicts increases through the end of 2010.
If you are thinking of buying a home, there is more to consider than just a higher monthly payment if mortgage rates increase, especially if you are on a tight home shopping budget. Higher mortgage rates in the near future can also influence your ability to qualify for your desired loan amount and your maximum home price.
Here is an Example:
If you were to apply for a home mortgage with a loan amount of $350,000 on a 30 year fixed interest rate of 5.25 percent, the monthly principal and interest payments would be about $1,927. If mortgage rates were to increase by half of one percent, the monthly payment for the same loan amount would be about $2,048 per month.
In this example, the increase of $121 would affect more than just your monthly mortgage expense, it also means that your gross monthly income would have to be about $390 higher in order to qualify for the same loan based on the conventional 28% mortgage debt ratio.
Another way to look at it; if you don't have the additional monthly income, the maximum loan amount you could qualify for in this example would be about $20,000 less at the higher rate.
Some mortgage borrowers are pushing the debt ratio limit, so this could be the difference between getting qualified for a loan, or not. If you plan on buying a home or refinancing sometime this year, you may want to re-calculate your ratio at a higher interest rate just to know where you stand.
The mortgage market group at Fannie Mae provides analysis of current and historical data, and forecasts economic trends in the housing and mortgage finance markets. Their economic outlook for 30 year fixed mortgage rates predicts increases through the end of 2010.
If you are thinking of buying a home, there is more to consider than just a higher monthly payment if mortgage rates increase, especially if you are on a tight home shopping budget. Higher mortgage rates in the near future can also influence your ability to qualify for your desired loan amount and your maximum home price.
Here is an Example:
If you were to apply for a home mortgage with a loan amount of $350,000 on a 30 year fixed interest rate of 5.25 percent, the monthly principal and interest payments would be about $1,927. If mortgage rates were to increase by half of one percent, the monthly payment for the same loan amount would be about $2,048 per month.
In this example, the increase of $121 would affect more than just your monthly mortgage expense, it also means that your gross monthly income would have to be about $390 higher in order to qualify for the same loan based on the conventional 28% mortgage debt ratio.
Another way to look at it; if you don't have the additional monthly income, the maximum loan amount you could qualify for in this example would be about $20,000 less at the higher rate.
Some mortgage borrowers are pushing the debt ratio limit, so this could be the difference between getting qualified for a loan, or not. If you plan on buying a home or refinancing sometime this year, you may want to re-calculate your ratio at a higher interest rate just to know where you stand.
