Interest Rate Fluctuations Impact Maine Mortgage Pre-approvals

When you get pre-approved for a home loan, it is based on a certain recurring payment. The interest rate is assumed (as well as other figures such as property taxes and insurance). Interest rate fluctuations impact Maine mortgage pre-approvals since it determines the principal and interest component of the monthly payment. It is useful for home buyers to understand this since a change in rates may affect purchase price limits.

Interest Rate Fluctuations

Interest rates may move on a daily basis. At certain times, they can even adjust many times within a single day. As a borrower, you will not know what your particular interest rate will be until you find a home, have an estimated closing date, and lock in your interest rate. Thus, there is some uncertainty, especially for price sensitive buyers. It is important to know what estimated interest rate was originally used to determine your pre-approval and to update the pre-approval. When interest rates are constantly or dramatically changing, contact your lender before preparing a bid on a property to confirm that you are still qualified to purchase it.

Interest Rate Fluctuations Impact Maine Mortgage Pre-approvals

Mortgage payments normally include principal, interest, property taxes, homeowners insurance, and mortgage insurance (if applicable). For this example, we will only discuss the principal and interest part. Assume that a borrower qualifies for a $300,000 purchase price based on a 30-year mortgage, 3.5% down payment, and 5% interest rate. The principal and interest monthly payment is approximately $1554. If the interest rate rises by half a percent, that same buyer will then qualify for only $283,638. That is a reduction of over $16,000 in the list price, which may lead to a property with fewer features. Conversely, if interest rates drop by 0.5%, the maximum price elevates to $317,843. The table below demonstrates the affect of additional increments for this same buyer using a monthly principal and interest payment of $1554:

Interest Rate Loan Amt Down Payment Purchase Price
4.00% $325,523 $11,807 $337,330
4.25% $315,912 $11,458 $327,370
4.50% $306,719 $11,125 $317,843
4.75% $297,921 $10,805 $308,727
5.00% $289,500 $10,500 $300,000
5.25% $281,436 $10,208 $291,643
5.50% $273,711 $9,927 $283,638
5.75% $266,308 $9,659 $275,966
6.00% $259,211 $9,401 $268,612

Remaining An Educated Buyer

Be sure to ask your mortgage consultant regarding the maximum payment amount for which you qualify. From there, you can better gauge the affordability of properties before making an offer. Remember that there are several variables to the total amount: interest rate, real estate taxes, property insurance, and mortgage insurance. If you wish to select a home near the maximum pre-approval amount, then it is extremely important to keep an eye on interest rates. Your mortgage officer and real estate agent can help with these estimates and provide other information on how interest rate fluctuations impact Maine mortgage pre-approvals.

About Mini Major

Mini views the purchase or sale of a home as a major life transition that usually evokes a wide array of challenges and emotions She brings her strong analytical, communication, and mediation skills to that process. For buyers, she helps to assess realistic goals and maps out a facilitation strategy that is uniquely designed to meet their individual styles with limited stress. For sellers, she provides honest, factual information necessary to set the right price and, together with the extraordinary resources of the Bean Group, provides state-of-the art marketing materials to present that property with appeal to the most appropriate potential buyers.

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