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Higher mortgage costs eat into buyers' budgets

As mortgage rates rise, buyers can afford less house.

Rising mortgage rates are taking a bite out of consumers' homebuying budgets.

Increases this year in home finance costs have already added about 15 percent to typical mortgage payments.

The higher mortgage costs may mean buyers have to settle for a less expensive house to qualify for funding.

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If mortgage rates tick up to 6 percent next year as expected, that will mean a typical U.S. buyer will have $52,800 less to spend on a home, according to a new report from Zillow.

In the D-FW area, a typical homebuyer will have to trim his housing budget by more than $58,000, according to the new report.

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"That means many home shoppers will need to reset their price points and make more concessions about where they decide to live, how much space they need and how long their commutes will be," Zillow analysts said.  "Already rising mortgage payments eclipse home-value gains, a phenomenon that can both encourage homeowners to stay put to hold on to low mortgage rates and discourage would-be first-time homebuyers."

Nationwide fixed-rate mortgages averaged just under 5 percent in November. That's about a percentage point higher than a year ago.

The rise in mortgage costs this year has contributed to a slowdown both in home sales and smaller price increases in North Texas and other U.S. markets.

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"While it's certainly important to keep track of home values and interest rates and plan your budget accordingly, buyers shouldn't base their decisions on those moving targets," Zillow senior economist Aaron Terrazas said in a statement. "It's also important to remember that rates on a typical mortgage remain very low by historic standards — especially given the type of strong economic growth we've been experiencing."