When you're financing your home, when you're getting a loan. Interest rates can really influence your buying power. 

So how can your buying power be influenced by interest rates? Buying power represents how much you can spend on a house.

And there's a lot of factors that go into that. But let's say for this example that your buying power today is that you can get a maximum loan of $300,000. So maybe you have to put money down. Maybe you don't put money down. We're not even talking about down payment. Your maximum loan buying power today is $300,000 and that's at three and a half percent interest.

And that three and a half percent is a fixed rate. It's fixed for 30 years. Your buying power can also be influenced by property taxes, but we're not going to talk about that. We're only talking about the principal, which is your loan amount and interest, which is the interest your pay back on the loan. So if you're getting a loan for $300,000 at 3.5% interest then your principal and interest payment will be fixed for 30 years. So every month your principal and interest would be $1347.13. 

But what if interest rates went up to 4%? Now, of course, if you've already locked in your rate with your lender, if you're in the middle of purchasing a property, then you're locked in. If you're not locked in and you're still looking at houses. Well, this math might affect you in the same scenario.

Your loan amount is $300,000, but it's 4% interest fixed for 30 years. Your payment for principal and interest is going to be $1,432.50. That's a difference of $85.12 a month. $85 might not seem like a lot of money, but everything adds up and it's possible that that $85 might exceed your buying power.

You see that $85 represents about $21,000 of buying power. So in theory, in order to get that $300,000 loan amount, you need to have the buying power of $321,000. I know the math is complicated and there's also a lot more to the math than just the principal and the interest. Like I said, property taxes can affect your buying. Lots of things can affect your buying power, but don't get hung up on the math. We have people that can do the calculations for you. Plus I have a cool real estate calculator and several apps that can figure the payment out.

They say that we can expect interest rates to go up possibly even up to 4%. By the end of the year, that's still a good interest rate over the course of 30 years. Heck, I remember in the year 2000, I qualified for a 7% interest rate on a mortgage, which was amazing at the time I share this because if you've been pre-approved for a while, but you haven't made a move for whatever reason, well, you might want to double-check and make sure that your buying power hasn't changed with any changes in the interest rate recently.

And if you're looking for ways to save money during the mortgage process, we've got a guide to where you can find the free money in the greater Des Moines area. So maybe that's free renovation money to update your new house. Maybe your job qualifies you for a 50% discount on a house. Wouldn't that be great? Or maybe you just want the inside scoop on the best- most affordable places to go register for our guide and we'll send you all the details.