It's a case if sticker shock for many home buyers this fall, as mortgage rates hovering around 7 percent combine with high home prices, forcing some out of the market.
Others are trying a more risky alternative, adjustable mortgages, and hoping rates fall in the next couple of years.
Keenan Crigler is a frustrated first time homebuyer. facing record home prices and mortgage rates that have doubled since last year.
Both are crimping his dreams.
"I did have to start lowering my budget," he said, "because with higher interest rate i don't want to be stuck paying a crazy mortgage payment."
The average rate for a 30-year fixed mortgage surpassed seven percent in recent weeks, adding nearly $800 to the monthly payment on a $400,000 home, according to Barron's.
Crigler's realtors, Steve and Denise Taylor of EXP Realty, say many buyers have dropped out, but say that's good news for buyers like Crigler.
"A year ago, a house like this would be on the market for just hours, and it would sell, Denise Taylor said. You have less competition now."
Alternative many buyers are choosing
Less competition is great, but 7 percent rates are not.
That has some buyers considering an alternative: an adjustable-rate mortgage, or ARM, where you pay a lower rate during an introductory period of 3 to 5 years.
Realtor Pete Kopf of Kopf, Hunter, Haas realtors said "I think the adjustable-rate mortgage gives that person is ready to buy a home, who needs to buy a home, to get into something at a lower, adjustable rate."
That can mean the difference between a 7 percent mortgage and a 5 percent mortgage.
Kopf says once that period is over, the interest rate can change every year, or even every few months, and your monthly payment can follow it higher.
He admits ARM's come with added risk, but make sense if you are staying just a few years, or if you think rates will drop again.
"There is an opportunity to refinance in the future," he said.
The trick is knowing how you'd handle rate increases once the initial period is over.
So ask yourself:
- How long will be you be in the home?
- Do you foresee a job change or salary increase?
- How much of your income goes toward other debt, like student loans?
Keenan Crigler still plans to buy, hoping rates fall in the future.
"Interest rates don't stay there, but your home will." he said.
So if you want to buy, many realtors suggest you take the risk now, and plan to refinance lager, so you don't waste your money.
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