When it comes to buying a home, there’s a lot to consider—location, size, style, and, of course, budget. But one factor that can dramatically shift your buying power, often more than people realize, is the interest rate on your mortgage. Even a small change—just 1%—can significantly alter what you can afford, and understanding this difference can help you make smarter decisions in today’s shifting market.

Why a 1% Difference Matters

It might sound small, but a 1% change in your mortgage rate can impact your monthly payment by hundreds of dollars, depending on the size of the loan. That difference not only affects your budget but can also change the price range of homes you’re able to consider.

For example:

  • $400,000 loan at 6% interest: Your principal and interest payment would be about $2,398 per month.
  • $400,000 loan at 7% interest: Your payment jumps to about $2,661 per month—a $263 monthly increase.

Over the life of a 30-year loan, that’s nearly $95,000 more in interest alone. That extra 1% can mean the difference between affording a home in your dream neighborhood or needing to adjust your expectations.

How Rates Affect Your Price Range

Let’s say your budget caps your monthly payment at $2,400. If interest rates are lower, you can afford a more expensive home without exceeding that limit. If rates rise, the same monthly budget might only cover a smaller home or a different area.

This is why savvy buyers often act quickly when rates drop—because it can instantly expand their options. Conversely, when rates rise, it’s important to reassess your budget before you start making offers.

Strategies for Maximizing Your Buying Power

  • Work with an Experienced Agent: Partner with a real estate professional who understands the nuances of the market and your financial goals.
  • Get Pre-Approved Early: This gives you a clear picture of your buying power at current rates and helps you move quickly when you find the right home.
  • Consider Rate Buydowns: In some cases, sellers or builders may offer credits to buy down your interest rate, which can make a big difference in affordability.
  • Stay Flexible: If rates are higher than you’d like, you can always refinance in the future when they drop—just make sure you can comfortably manage the payment in the meantime.

The LGBTQ+ Homebuyer Perspective

For many LGBTQ+ homebuyers, finding a welcoming neighborhood and supportive community is just as important as the home itself. Interest rate changes can influence where you’re able to buy, making it even more important to understand your numbers and act strategically. Working with an LGBTQ+ affirming agent ensures that you have both financial expertise and cultural understanding on your side.

A 1% change in mortgage rates might seem minor, but it can have a major impact on your buying power, budget, and long-term costs. By understanding how these shifts work, you can position yourself to make the most of favorable rates and navigate the challenges when they rise.

For personalized advice and connections to LGBTQ+ affirming real estate professionals who understand your needs, visit GayRealEstate.com.