Last weekend, I was helping a buyer make an offer on a lovely home.
The only problem was that it was a multiple offer situation and we had to have the strongest offer possible.
The buyer, Ana, was very excited about making an offer and she was ready to make an offer for a higher amount than the list price, in order to out-bid other potential purchasers.
But when we started looking at the details, we realized that Ana’s lender’s pre-approval letter was dated four weeks earlier.
Mortgage Interest Rates affect your buying power
Normally, a 4-week old letter wouldn’t be a big problem
Normally, a 4-week old lender letter wouldn’t have been such a big issue, but since the mortgage interest rates have been going up in the last two weeks, this could be a real factor.
The Lender letter indicated that Ana was pre-approved for a sales price up to $400,000, with an interest rate of 3.50%. That would have given Ana a monthly payment of $1,436.
But now that the interest rates were at 4.50%, to keep the same payment of $1,436, Ana’s pre-approved purchase price would have to be about $355,000.
Ana and I promptly got on the phone with her mortgage lender to review her options and to get her pre-approval letter updated reflecting the new interest rates.
Why did mortgage interest rates suddenly rise? Continue Reading…