Purchasing Power & Mortgage Rates

Facts:??

1. Let use today's quickly approaching 7% 30-year fixed mortgage rate (9/29/2022) vs 3% 30-year fixed mortgage rate just one year ago.
2. Let's assume a buyer has $140,000 for down payment -
3. Let's look at it in terms of how a car dealership work - what is your comfort level as to monthly payment and what will the lender lend based on your income and debt load.

Scenario as to how significant interest rates are on home buyer pool??

1. Offer price is $700,000 with 20% down ($140,000) for a mortgage amount of $560,000
2. Monthly Principal and interest only at 7% =$3,726 per month
3. Monthly principal and interest only at 3% =$2,361 per month
4. Delta of $1,365 per month?
5. At a 35% debt to income ratio analysis - the buyer(s)gross monthly income needs to be $3,900 a month higher under scenario #2 above vs #3 above.?

Let's relate that to housing price: The buyer is comfortable with paying $2,361 (scenario #3 above) per month before property taxes and insurance.?What would the purchase price have to be based on the fact, the buyer has $140,000 for down payment to equate to a payment of $2,361 per month at 7% mortgage rate?

The answer is a mortgage of $360,000 at 7% equates to a monthly payment of $2,395.?Add on the $140,000 down payment and this buyer can pay $500,000 for the subject property. A year ago, the buyer could pay $700,000.??A difference of $200,000 loss of purchase power.?

#mortgage #realestate #homebuying #interestrates #economy