Investigating Lower Mortgage Rates

April 30, 2024

Mortgage rates have been a hot topic in the housing market over the past few years. Many homebuyers have found ways to make a new home more affordable as interest rates have been fluctuating during their home search.

An interest rate buydown allows homeowners to obtain a lower interest rate when taking out a mortgage loan. Buydowns can save homeowners money on the interest over the life of the loan. A buydown can involve purchasing discount points against the mortgage loan, which may require payment of an upfront fee. In the case of discount points, the rate is lower over the life of the loan. For example, if the current rate at the bank is 7.9%, a buyer could pay discount points to buy that rate down to 7.6%. Having this 7.6% over the life of the loan would allow the monthly payments to be more manageable.

So, what does that mean for your homeownership plans? As mortgage rates fluctuate, they impact your purchasing power by influencing the cost of buying a home. Even a small dip can help boost your purchasing power. Here’s how it works.

The median-priced home in the Twin Cities Metro for 2023 was $368,000. So, let’s assume you want to buy a $400,000 home. If you’re trying to shop at that price point and keep your monthly payment between $2,500-2,900 or below, here’s how your purchasing power can change as mortgage rates move up or down (see chart below). The red shows payments above that threshold and the green indicates a payment within your target range.

For more details, contact us and we can connect you with our preferred lender.

Scott Gustafson
Vice President of Sales

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