Homebuying season is back! Open houses have begun, and it appears that mortgage rates may have peaked after three years of relentless increases. Which brings us to the all-important question:

I live just outside Boston, MA, so I am using Northeast home prices as my examples. Right now it’s a very challenging housing market. I don’t have any hard data, but from my observations, I can tell you that buying a starter home in Greater Boston can easily cost you half a million dollars. There aren’t many homes for sale which is likely due to the large number of people who locked in low mortgage rates before 2022 and don’t want to, or can’t afford to, give them up. So where are mortgage rates now?

Mortgage Rates

The chart above shows how 30-year and 15-year mortgage rates have fluctuated over the past year. As of now, it appears rates peaked (hopefully for good) back in October 2023, with the 30-year fixed rate topping out at 7.79%.

Today the 30-year mortgage rate is 6.88%, which in dollar terms means that if you borrow $100, you need to pay back $106.88. So using that as our benchmark, let’s see how much home we can afford.

Down Payments

When you buy a home one of the most important decisions you have to make is how much money to pay upfront, called the down payment. The more money you put down, the less you have to borrow. Some people like to put down a large amount to reduce their monthly mortgage payments, and some like to put down as little as possible for various reasons. Like most things in personal finance, it’s personal.

If you put down less than 20% however, you will have to pay private mortgage insurance (PMI), which can be costly. So for our examples, we will use 20% as our down payment on each home.

Monthly Mortgage Payments

This brings us to the monthly mortgage payments. These are the amounts that would be due every month on a 30-year fixed-rate mortgage with a 6.88% interest rate at each price point.

What these amounts do not include, however, are real estate taxes, insurance, maintenance, and in some cases association fees, which can all vary drastically by zip code and will likely increase every year.

Buying a home is one of the biggest, if not the biggest, financial decisions you will ever make. There are a lot of factors that need to be considered in a very short amount of time. It’s a high-pressure and emotional experience - no way around it. That is why having a well-thought-out game plan before you start your search can make all the difference.

If you need help creating that plan, please reach out. I’d be more than happy to help.

Thanks for reading!

Brian Bond, CMT