Low rates and purchasing power are closely linked. Interest rates are at historic lows, which makes now a great time to buy. Freddie Mac's recent Primary Mortgage Market Survey illustrates interest rates are at approximately 3.47%. Remarkably, interest rates have remained at or below 3.5% for a consecutive sixteen weeks. This is truly historic rates we are experiencing now.
Low interest rates can effect not only the monthly housing expenses, but also the total size of the loan you may qualify for. Because housing inventory still remains a challenge in some areas, it is crucial to obtain a pre-qualification before you go shopping. When the lender reviews your income, asset and debt documentation, the total loan amount will be established. Lower rates allow for more purchasing power, while higher rates limit purchasing power. As rates raise the price of the house you can afford will decrease if you are planning to stay in a certain monthly budget.
The chart below shows what impact rising interest rates would have if you planned to purchase a home within the national median price range, with plans to keep the payment at $1100. This illustration is provided by Keeping Current Matters.