Homebuyers Take Note: Mortgage Elevator Is Going Up

Before you go, we thought you'd like these...
Before you go close icon
mortgage elevatorConsider this the "snap out of it" slap that Cher gave Nic Cage in "Moonstruck." If you're in the market for a house, you need to buy it while the interest rates are low -- and by the way, those rates crept up a bit already this week.

Purchase price? Feh. When it comes to how much house you can afford, the number that really matters -- unless you live in the rarified world of cash buyers -- is what interest rate you can get. And the bad news, for those of you who thought you could wait it out until some expert told you the housing market elevator had reached the bottom floor, is that the real elevator is heading back up -- and that's the elevator of interest rates, not home prices.

According to Dan Green at The Mortgage Reports, for each 1 percent increase in mortgage rate, your home purchasing power drops 10.75 percent. That means if you could afford a $600,000 house when interest rates are 4.5 percent, you can only swing a $535,000 house when the rates go up a percentage point, assuming the same monthly mortgage payment. For each 0.125 percent increase to mortgage rates, your maximum allowable purchase price falls 1.35 percent.

With the exception of a three-month period, average monthly 30-year fixed mortgage interest rates have been at or below 5 percent since 2009. That's completely unprecedented: Average rates had never even hit a low of 5 percent prior to 2009.

The message: You'll get a whole lot more house for your money if you move quickly.

For more on mortgages and related topics see these AOL Real Estateguides:

More on AOL Real Estate:
Find out how to
calculate mortgage payments.
Find
homes for sale in your area.
Find
foreclosures in your area.
Read Full Story

Want more news like this?

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

Find a New Home

Buy
Rent
Value
Powered by Zillow

From Our Partners

Driver Sees Something Move On The Side Of The Road - When He Pulls Over He Can't Believe Driver Sees Something Move On The Side Of The Road - When He Pulls Over He Can't Believe
The Haunting Face of a Man Who Lived 700 Years Ago The Haunting Face of a Man Who Lived 700 Years Ago
Man Built This Contraption In His Backyard - And Even He Was Surprised How Well It Worked Man Built This Contraption In His Backyard - And Even He Was Surprised How Well It Worked