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Last week, the real estate market was set abuzz by an almost 0.5% decline in the 30-year fixed-rate mortgage (FRM) interest rate. It dropped from a high of 7.08% to 6.61% in just one week. Why? Reports began to surface that inflation may have already peaked back in June. However, several Fed members tried to keep expectations in check. After all, one month of positive economic news does not a trend make. They even suggested that more prime rate increases should be expected in the near future. If you wish to buy an Inland Empire home anytime soon, you need to understand how interest rates affect you.
How Interest Rates Affect Home Buyers
Redfin conducted a survey that found just how much of an impact higher interest rates hit home buyers’ budgets. They found that home buyers could purchase a $517,000 home at 3% with a $2500 monthly budget for their mortgage. But when that rate rose to 6%, that same $2500 budget only allowed them to pay $400,000 for a home. With the current 6.61% rate, that sale price comes down even more. With an average sale price for a Riverside, CA home coming in at $577,000 last month, Inland Empire home buyers continue to feel the pinch.
How to Get Yourself in the Best Financial Position to Buy a Home
You cannot control interest rates. However, you do have some control over your finances. If rates go up again (and they might), you may need to increase your budget to accommodate your mortgage payment. That means getting your credit in tip-top shape. That way, you qualify for the best rates. It also means paying down as much debt as possible and coming up with a larger down payment. It also may mean looking outside of your dream neighborhood. And the old real estate advice of buying the worst house in the best neighborhood still rings true. Talk to your lender well before you start looking for your new Inland Empire home. They can provide you with an excellent roadmap of where to concentrate your financial efforts to prepare yourself for homeownership based on your current situation.
Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty
