There are two big variables involved in the financial side of every home purchase. Those factors are the price of the home and the interest rate attached to the mortgage. Each of these is important, of course, but which one should get more of your attention? This article will take a closer look at that important question.
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How Interest Rates Influence Affordability
Interest rates have a powerful, long-term impact on what you end up paying for a home in the end. Even a slight change in interest rates, say half a percentage point, can change your monthly payment by hundreds of dollars. If you multiply that difference by the hundreds of payments you’ll make over the life of the loan, it becomes obvious just how important interest rates can be.
Why Home Prices Still Matter
Of course, while interest rates are important, the actual price of the home remains a critical part of the equation. The purchase price of the house not only affects how much money you’ll need to borrow for the mortgage, but also how much you will need to produce as a down payment. If you try to stretch this purchase and buy a home that is on the edge of what is affordable, you’ll limit your financial flexibility and your options to make other purchases in the future. Every dollar matters on the purchase price, so negotiating with the home seller and working out a deal that is suitable for your budget is an important part of the buying process.
So, Which is More Important?
In the end, there really isn’t a way to say which of these is more important. They work together, and you can’t ignore one just to focus on the other. If you are only worried about locking in a good interest rate and wind up paying a higher-than-necessary price for the house, that won’t be a good deal. And the opposite is true, as well.
Also, there isn’t much that you can do about interest rates, as they are largely set by the market. House prices, too, are set by the market, but you can adjust the size of the house you purchase, or the location of that house, in order to bring the price down into a more comfortable range.
See the Whole Picture
When buying a home, it’s best not to get too focused on one particular element or part of the deal. It all matters, and you need to make sure the big picture is going to make sense for your financial future. With that in mind, partnering with proven real estate agents like those at Smith Marketing is a big step in the right direction. If you are ready to look at houses for sale and zoom in on the ideal property for your family, reach out today.
