The interest rates have a significant impact on your monthly payment. Waiting for a decline in the housing market may not work to your advantage because the rates could increase during that same time and actually increase your monthly payment over purchasing the same home at a higher sales price.
Below are several examples of how the rates affect the monthly payments based on various purchase prices. Mortgage rates are at historic lows and inevitably will increase. The average 30-year fixed rate over the past 12 years is 4.52% with average rates in 2008 as high as 6.23%
EXAMPLE: Purchase price of $400,000 at a rate of 4.5% is $100 higher than the payment at a purchase price of $450,000 and a rate of 2.75%. So if you were thinking of buying a house that was priced at $450,000 and you decide to wait because you believe the prices will drop and that house does drop to $400,000, but the rates normalize, you will actually end of with a higher payment at that lower sales price. But, the values may not decline and the rates may still increase, and you may no longer be able to
afford that same house at $450,000 because at a rate of 4.5% the payment increased to $3,097!
If you are ready to buy a home, now is a great time!
