Mortgage Rates And Necessary Incomes

"Mortgage rates rose this week, going back to the same level as a couple of weeks ago. According to Freddie Mac, the average rate on a 30-year fixed mortgage ticked up to 6.39% from 6.35% the previous week. These fluctuations in rates will continue to persist, affecting the housing market as mortgage rates have a direct impact on the monthly mortgage payment. But with inflation easing further and the Federal Reserve expected to pause its rate hikes soon, mortgage rates will stabilize near 6% in the second half of the year."

That quoted text is from the National Association of Realtors. They do these 'Instant Reaction' quickie blurbs and I wanted to put out some notes about interest rates and houses here in my blog.

Ah, they look so happy thinking about buying a home! Hopefully they have a good amount saved and they actually make a good amount of money.

Right now, let's say they want to live in Santa Clarita and are looking at the 800k range for a lovely home. For my buyers ease, if they haven't spoken with a lender yet, I use Karl's Mortgage Calculator on my phone.

$800,000 - Price of Home.

$160,000 - 20% Down Payment (not including closing costs).

6.4% interest rate - $4003.24/Month ($4961.57 if you add in property Taxes and Insurance).

Based upon predictions of rates going down to 6% the monthly payment would be $3837.12 (4795.46 with T & I included).

So, how much do you need to make to afford this house? Simple math only here. This would be for someone without a ton of debt. Not even going to mention FICO scores now. Standard used to be about 28% of your gross income could go towards your mortgage. Now, it's been pushed up to about 33%. Of your gross, not your net.

Simple math here again.... that would mean at almost 5k per month in a mortgage, you'd need to be grossing about 15k per month or 180k per year.

Back it down to a 600k house at 6.4% rate with 20% down? Monthly payment with Principle, Interest, Taxes, & Insurance? About $3800/month instead. Income needs? Approximately $137,000 per year.

We'll call this a Finance Friday blog post. But, I'm still gonna harp on any would-be buyer(s) about getting pre-approved well before you start your home search, online or in your favorite Realtors' car.

Food for thought people, important food for thought!

What does food for thought mean? The phrase food for thought refers to an idea or piece of information that's worth pondering or thinking over.