Most people know that the interest rate on your loan affects your monthly payment – the higher the interest rate, the higher your monthly payment will be. What many people don’t realize is that higher interest rates also translate into less purchasing power.
When you get pre-approved and want the absolute highest loan amount that you can qualify for, there may not be much room for error. This is because you’re getting approved for a maximum monthly payment based on your debt to income ratio.
We typically convert this maximum monthly payment into a maximum purchase price to make your shopping easier. The maximum monthly payment is based on current interest rates. As rates rise and payments go up for the same home, you may need to either buy down your interest rate with points, put more money down, or lower your offer price.
What does this mean? If you’re shopping for a home as interest rates are rising, you many not be able to qualify for the maximum amount you were pre-approved for late last year, or even last month.
We keep our rates as low as possible to make sure our clients can qualify a little more easily for their dream home.