BALTIMORE — Freddie Mac reports mortgage rates have soared past 4.5% as the threat of rising interest rates has prospective home buyers concerned about how much house they can still afford.
The spring home buying season is here. Home buyers have a lot on their minds, from finding their dream house and perfect neighborhood to affordable mortgage payments and rising interest rates.
LIVE Baltimore executive director Annie Milli said “I think the greatest concern that I have for buyers in the market right now is the pressure that they’re feeling to make a quick decision,” Milli said.
“So, whether that’s because the news about interest rates is pushing them to think about making a purchase sooner than they might be ready or whether it’s the news about the competitive nature of the market really encouraging them to spend more than they can afford,” Milli added.
At LIVE Baltimore, Milli works to promote home buying in Baltimore city.
“Baltimore city is the most affordable county in the Baltimore metro region. Our median home price right now sits at $200,000. So, a buyer who is going to be purchasing that price home is gonna be making somewhere between a 3% and 20% down payment. They’ll probably be looking to mortgage between $160,000 and $190,000,” Milli said.
According to officials with the federal home loan mortgage corporation known as Freddie Mac, mortgage rates continue to climb.
The interest rate on a 30-year-fixed rate mortgage hit 4.67 percent on March 31.
It’s nearly a 47% jump from 3.18% a year ago.
Between inflation and the federal reserve looking at raising interest rates. Finance experts believe mortgage rates could soon hit 5% or higher.
“We like to help our buyers think about what’s the monthly payment that they’re comfortable with and then encourage them to seek out skilled mortgage professionals who are gonna really work with them to put together a loan that’s gonna get them to that monthly payment,” Milli said.
“In many cases, that loan that’s gonna get you to the right monthly payment could even have a higher interest rate based on some of your other goals,” Milli added.
Buyers may wonder how much of an impact could rising rates have on your monthly payment.
For example, buying a $200,000 house with 3% down, at last years mortgage rate of 3.18%, estimating taxes and insurance, the monthly payment would have been $1,424.
At the current rate of 4.67%, the monthly payment in this example is now $1,590. If mortgage rates reach 5%, the monthly payment jumps to $1,628
With these figures, the monthly mortgage payment is now $200 more than what a buyer would have paid a year ago.
“So, a higher interest rate is gonna have more of an impact on a buyer who’s planning to stay in that home for the entire duration of the loan term. If you’re going to stay in your house for 30 years, that interest-rate is more important than if you’re going to stay in your house for 5 to 10 years,” milli said.
There's also another factor facing buyers trying to budget their money.
“The bigger issue that buyers are going to be facing is the fact that home values have been going up. What people have been spending on homes is increasing, that is more driven by the demand in the market than it is based on the interest rates. So, I would really say the larger affordability concern is with rising prices not with rising rates,” Milli said.
For people in the market for a new home, especially first time homebuyers with a lot of questions, the residential non-profit LIVE Baltimore can help ease the burden.
“We are a one-stop shop of information about down payment and closing cost incentives and also tax credit programs. So, we can really help those who come and work with us to maximize the affordability of their home in Baltimore city
These numbers are just examples. Buyers also can put more money down to lower their monthly payment.
Freddie Mac's offers several online mortgage calculators to see how much it would cost to buy a house, using different scenarios.
Even though mortgage rates are 4.67% and higher than what they were a year ago, rates are not as high compared to the time they reached 18.63% in October 1981.
Some may look at condos as a way of saving money, however, the mortgage rate for a condo tends to be about a quarter-point higher than for a house.
Condos are just as hot right now, causing condo prices to rise due to demand.
According to the housing market website Redfin, Baltimore city condos are selling in 26 days, about 60% sell in two weeks, and about 40% sell over the asking price.
For more information on LIVE Baltimore and incentives for Baltimore city home buyers, click here.
