Rising Interest Rates Turning Home Dreams into Nightmares in Washington
Getting a new home just got about two percentage points harder and that could make all the difference between a dream and a nightmare. As we're all aware, buying a house in Washington has been a bonanza since the end of 2019. As the pandemic raged on, the market became a seller's market at the expense of people looking to buy their first home without having to settle or become house-broke.
Interest rates on home loans have jumped up to 7.368% in Washington.
It's perfectly normal to experience anxiety when you're part of the circus that is buying a new home. The best advice I ever got when I bought my first home was, "Just when you've been put through the grinder of paperwork and signatures, just when you're about to throw your hands up and walk away; that's when it's done."
It's even harder now to buy a house than it was last month. Rates for a 30-year fixed mortgage have jumped up to over 7% in Washington, up from just over 5%. There was a big drop in early February, but interest rates are climbing back up to December 2022 levels. This difference in percentage points can bump your monthly payment for a potential home loan out of your budget.
We're going to use a primitive calculating tool. In fact, we're using Google. If you want more in-depth data and analysis, this graph from the Federal Reserve Bank of St. Louis has more detail and is updated weekly. So, let's say you set your home loan budget for $300,000. That's what it takes to get something decent in Washington these days. With a good credit score of 700, you put down 20% for the house. That adds up to $60,000. The current interest rate would make your home payment $2,071. I dropped the interest rate in the calculator down to 5.5%, closer to 2022 numbers. That makes your estimated monthly payment $1,703. That's quite the difference. It's amazing what a couple of percentage points can do. That's why I hate math.
Is there still hope?
There's always hope! Home loan interest rates are moving weekly. You just need to be patient and be prepared to pounce when interest rates go back down. You can also save up more money for a down payment to help your cause a bit. Don't be discouraged, just be patient.