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You may aware of a potential rise in mortgage rates during the next several months, which could impact the ability of some borrowers to buy a home or refinance a mortgage.

Fannie Mae has a mortgage market group who provides analysis of current and historical data, and forecasts economic trends in the housing and mortgage finance markets. Their economic outlook for 30 year fixed mortgage rates forecasts periodic increases through the end of 2010.

If you are in the market to buy a home or refinance a mortgage, there is more to consider than just a higher monthly payment if mortgage rates increase, especially if you are on a tight budget. If the forecasts are right about rising mortgage rates this year, how does that influence the maximum home price and loan amount you able to get based on your income?

Here is an Example:

If you were to apply for a home mortgage with a loan amount of $350,000 on a 30 year fixed interest rate of 5.25 percent, the monthly principal and interest payments would be about $1,927. If mortgage rates were to increase by half of one percent, the monthly payment for the same loan amount would be about $2,048 per month.

In this example, the increase of $121 would affect more than just your monthly mortgage expense, it also means that your gross monthly income would have to be about $390 higher in order to qualify for the same loan based on the conventional 28% mortgage debt ratio.

Another way to look at it; if you don\’t have the additional monthly income, the maximum loan amount you could qualify for in this example would be about $20,000 less at the higher rate.

Some mortgage borrowers are pushing the debt ratio limit, so this could be the difference between getting qualified for a loan, or not. If you plan on buying a home sometime this year, you may want to re-calculate your debt ratio at a higher interest rate just to know where you stand.

Get more information about home loans, and find out about San Diego new homes.

Tags: financing, Mortgage, real estate, Refinance
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