Purchasing a home just got harder with mortgage rates at 5%

Applications for mortgages are down by a whopping 40% from a year ago with some rates now nearing or at 5% and sure to climb.

Home prices have risen dramatically and so have interest rates. But, what many don't know is that the common mortgage payment for Californians is 60% higher than in March 2021.

In March of last year, a home purchased for $607,000, is now $759,000. Assuming there's a 20% down payment, there would have been a 2.74% interest rate versus close to 5% as of now.

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A year ago the monthly payment on that very same home, would have been $1997 compared to $3260. That's a $1263 difference every month, not including insurance and property taxes sometimes added on to the monthly payment.

Few, if any, incomes have risen nearly that much in the last year.

"More people are getting taken out of the housing market because it takes so much more money to qualify for the house that they are looking at," said East Bay realtor Sam Benson.

The debt people already have, often counts against their income.

"It's just so important for people to pay off revolving and installment debt when buying a house," said Benson.

Add in, bare-knuckle competition for the few homes available. That often results in overbids that push some buyers out of qualifying for an even higher loan.

"Our advice, many times, is to look at a price that is lower than what they thought they could afford. And so maybe they don't have quite the house they wanted to buy, but they can get in the market and go from there," said Compass Real Estate Senior Realtor Kathee Shatter.