One of the hardest parts of planning a home purchase right now is knowing what your monthly payment may look like by the time you are ready to buy. A small change in the mortgage rate can make a noticeable difference in purchasing power, which is why I often encourage buyers to leave themselves some breathing room when setting a budget. This week, I am sharing a National Association of Realtors news article by Melissa Dittmann Tracey, “Rate-Hike Shock? Here’s How Buyers Can Budget for It,” which offers a practical framework for preparing for possible rate changes before a purchase.

A new study reveals how house hunters can plan for mortgage rate swings without derailing their housing budget.

Mortgage rate volatility may have home shoppers unsure of how to plan for costs. A report from Realtor.com https://www.realtor.com/research/rate-volatility-2026 shows how potential buyers can “rate-proof” their housing budget to avoid getting caught off guard if mortgage rates rise closer to their purchase.

To help set a homebuying budget, buyers can use these rate ranges, which reflects about 80 percent of historical rate changes:  

* 12 months out from a home purchase: Use today’s rate +/- 100 basis points
* 6 months out: Use today’s rate +/- 75 basis points
* 3 months out: Use today’s rate +/- 50 basis points

Related: What 7 Percent Rates Could Mean for Home Buyers https://www.nar.realtor/news/real-estate-news/what-7-rates-could-mean-for-home-buyers

An Example of How This Could Affect Payments. Mortgage News Daily reported that the 30-year fixed-rate mortgage averaged 7.19 percent on Sept. 22. Using that rate as a starting point, buyers could then use a mortgage calculator like the one located on Realtor.com to see how different rates could affect their purchasing power.  

* Buying in 12 months: Plan for rates between about 6.19 percent and 8.19 percent
* Buying in 6 months: Plan for rates between 6.44 percent and 7.94 percent
* Buying in 3 months: Plan for rates between 6.69 percent and 7.69 percent

“Buyers looking to purchase in one year should be ready for anything between a mortgage rate of about 6 percent and one of about 8 percent based on today’s rates and historic volatility,” writes Joel Berner, senior economist at Realtor.com.

For example, a buyer with a $2,000 monthly budget for principal and interest who was planning to buy in a year may want to leave enough room for a mortgage of about $327,000 at 6.19 percent, but would only have about $268,000 at the higher rate. That’s a difference of nearly $60,000 in purchasing power based solely on possible changes to the interest rate over a year’s span.  

The range narrows as the purchase gets closer. At six months, the same $2,000 monthly budget would support a loan of about $318,000 at the lower 6.44 percent estimated rate versus about $274,000 at 7.94 percent - a difference of about $44,000.  

At three months, the difference falls to about $30,000, with the $2,000 budget supporting about $310,000 at 6.69 percent versus $281,000 at 7.69 percent. 

For Buyers Willing to Take on More Risk. The calculations change for buyers willing to take on more risk. Realtor.com also calculated a narrower range that historically would have captured about 50 percent of mortgage rate outcomes: 

* 12 months out: Use today’s rate +/- 40 basis points
* 6 months out: Use today’s rate +/- 30 basis points
* 3 months out: Use today’s rate +/- 20 basis points

This Isn’t a Prediction of Mortgage Rates. The report isn’t forecasting where mortgage rates will go. Instead, Realtor.com researchers looked at monthly changes in Freddie Mac’s 30-year fixed-rate mortgage since 2000 to quantify how much rates have historically moved - up or down - over three-, six- and 12-month periods.

Mortgage rates remain subject to a range of economic forces. Lawrence Yun, chief economist at the NAR says to expect 7 percent mortgage rates “as the new normal,” but says rates could eventually move lower if oil prices retreat the federal budget deficit is reduced and productivity gains from artificial intelligence help ease inflation. He cautions, however, that those developments are uncertain in the near term.

As such, the historical range can give buyers a framework for preparing their budgets. “Buyers need to feel some reassurance that purchasing the home of their dreams is not out of reach,” Berner says. “They need some guidelines about how to plan for rate volatility in the months leading up to their purchase.”  

No one can tell you exactly where mortgage rates will be when you are ready to buy, but you can prepare for more than one possibility. Building some flexibility into your budget now can help you avoid having to completely rethink your search later if rates move. A local realtor, along with a trusted lender, can help you understand how different rates may affect your price range and create a home search that stays focused on what works for your finances and your goals. #That'sWhoWeR