As a smart buyer, you will start your pre approval process before you ever start your home search, this way you will know how much of a home you can purchase or have a good sense of your maximum purchase price to stay within your comfort payments. Your lender will calculate how much you can afford based on your income, debts, taxes, hazard insurance, HOA fees, mortgage insurance if required and current interest rates. A key and variable factor in calculating your maximum purchase price will be the current interest rates. As rates change so can your purchasing power. The two charts below are calculating only principal and interest payments ($300,000 & $400,000 purchase price) and the relationship they have to a changing interest rate. As an example, if you are qualified for a $300,000 loan and the current interest rates are 3.75% you could expect to see a principal and interest payment of $1,389 per month. Should you find yourself paying an additional 1% more or 4.75% interest you can see the payment will go up to $1,408 for principal and interest every month and in addition your purchase power will decline 10%. Whereas before, you could purchase a $300,000 home at 3.75% interest rate your ability to purchase would be reduced to a $270,000 home if you were paying a 4.75% interest rate. For every 1/4% interest rate change you will see your purchasing power change by about 2.5%. Conversely, if the interest rate on your loan goes down from what your lender was calculating then expect to see more purchasing power or paying less on your principal and interest.