How Interest Rates Affect Your Buying Power

Interest rates get a lot of attention in the news, and you probably know that for buying a home, lower equals better. But how do interest rates actually affect your home buying power, and what can you do to maximize it? Let’s talk about it. Interest rates are essentially the cost of borrowing money. They directly affect your monthly mortgage payments and overall home buying power. When your rate is low, your monthly payments are lower. This means you can afford a more expensive home while staying within your monthly budget. But when rates rise, your monthly payments increase. This can limit the price range of homes you're able to consider. Additionally, even a small increase in your interest rate can cost you tens of thousands over the lifetime of the loan. You can’t control when the Fed is going to raise or lower rates—but there are some things you can do to reduce your interest rate and increase your buying power. One, improve your credit score to get the best rate possible. Two, shop around for lenders. The first won’t necessarily be the best. Three, keep track of rates and lock one in when they’re low. These are just a few tips for reducing your rate and increasing your buying power. For more, check out my latest post on our blog.