Q: How can my monthly payment remain the same, while the purchase price varies significantly in my income bracket?
Since I posted the FHA Affordability Chart and the Conventional Mortgage Affordability Chart, I have received several questions regarding the monthly payment column. The most common question has been ‘How can my monthly payment remain the same, while the purchase price varies significantly in my income bracket?’
Your Mortgage Interest Rate Matters
The reason for the difference in loan amount is the interest rate. When you qualify for a loan, you are essentially qualifying for the monthly mortgage payment you can afford based upon your income and debt. Depending on the interest rate, you may be able to afford more or less, but you will always qualify for the same monthly payment. The lower the interest rate, the more house you can afford.
Use Mortgage Interest Rates to Your Advantage
As you can see from the chart, the interest rate can have a significant influence on the loan amount you are qualified to receive. Because of the savings a borrower can attain by lowering their interest rate, many home buyers are now asking sellers to buy down the interest rate, which can be a win-win for all parties to the transaction. Sellers are happier because it costs them less to buy down the interest rate enough to make an impact on the buyer’s monthly payment than to reduce the selling price to make the payment lower. And, buyers are happy because they can afford a more expensive home than what they had anticipated and still pay the same monthly payment.
Thanks for your questions and keep them coming!
Stay tuned for my next post where I will give you a real world example of how an interest rate buy down impacted the buyer’s monthly payment.
Other Posts You May Enjoy
- FHA Affordability Chart
- Conventional Mortgage Qualification Chart
- I Need Perfect Financials to Get a Loan in Today’s Market
- 2009 Bay Area Conforming Loan Limits
- Popping and Locking: Interest Rate Style
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Chris Williamson is a Mortgage Advisor with Mortgage California specializing in San Mateo Mortgage.
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