Essay About Interest Rates And New Home

Eco 372 – Product Purchases and the Economy
Product Purchases and the EconomyFelicia OsborneECO/372December 7, 2015Dr. Bert WheelerProduct Purchases and the EconomyConsumers, such as myself are using more caution when it comes to determining whether or not we should invest in purchasing a new home. There are numerous factors to consider before purchasing a new home that is not limited to the price and location. I must partake in the necessary research to know what lies ahead for me when it pertains to budgeting and making monthly payments on a new mortgage. The well being of the economy can be a game changer on whether or not I should make such a huge investment as purchasing a new home. Two important economic indicators, which will aid in helping me to determine if purchasing a new home will be a wise and good investment, are the interest rates and housing start.Economic IndicatorsAccording to Investopedia (2015), an interest rate is the sum charged, communicated as a rate of essential, by a loan specialist to a borrower for the utilization of benefits. Interest rates are commonly noted on a yearly premise, known as the yearly rate (APR).The interest rate affects the affordability of buying a home. If the rate increases by 1%, it will have a significant impact on my monthly payment. For example, if I am looking to purchase a home that cost $400,000.00 at an interest rate of 3.0%, I am looking at a mortgage of $1,686.00. If that interest rate were to increase by 1%, my monthly payment would increase by $223.00 with a monthly note of $1,909.00. The rate increase would have a significant impact on my household as well as my finances if I have not budgeted or saved enough money in the event if something like this were to happen. As a potential buyer, my credit score or credit history will determine my interest rate. While doing research, I have learned that it is imperative to consult with a professional such as realtor to find out my options and to get pre-qualified before looking for a home.Another economic indicator that I need to consider is housing starts. According to Business Dictionary (2015), housing starts are the quantity of new single or multi-family lodging units as decided from various licenses issued for development of private structures.Housing starts is a vital financial indicator because of its broad overflow advantage for alternate sectors (retail, manufacturing, utilities) of the economy. Home manufacturers more often than not dont begin to build a house unless they are genuinely certain it will sell upon or before it is finished. Changes in the rate of housing starts are indicators to let me know about the demand for homes and the viewpoint for the construction business. Moreover, every time another home is begun, construction business rises, and money will be pumped back into the economy. When the house is sold, it produces incomes for the home manufacturer and a horde of consumption opportunities for the new homebuyer such as myself. Appliances, furniture, and landscaping are only a couple of things I can spend cash on, so the financial “expansive influence” can be generous particularly when you consider it as far as more than a hundred thousand new family units around the nation are doing this consistently.