Five Ways to Beat Higher Interest Rates

We get it! Rates are definitely higher than they were within the last 24 months. We have been asked many times, “Is now still a good time to buy Real Estate?” We cannot make that large decision for each person, but what we encourage each person to do is to evaluate the numbers and what works with their family, speak to a lender, learn about the process and responsibilities of being a homeowner (by sitting down with us), and make an informed decision.

Yes, rates are higher which will affect your buying power, but that does not mean you shouldn’t invest in Real Estate- which has proven to be one of the safest investments over time.

Here are five ways you can manipulate the current market rate to work better for you, should you decide homebuying is right for you and your family!

1) Buy Points:

This truthfully was even happening the last few years! You can buy what lenders call “points”, which reduces the total rate you pay. 1 Point = $1,000 per every $100,000 of your mortgage amount. Let’s take the purchase price of $200,000 for easy math. IF you purchased one full point (which you can do .25, .5, etc.), and you were quoted 6% for a mortgage interest rate, you would pay $2,000 at the closing table, and would reduce the rate to 5% which saves you Nearly $150/ month on your payment.

2) Continue to work on your credit.

The better your credit, the better the rate! Review your accounts, payment history, keep your revolving debt LOW, and try to avoid opening any new lines of credit when you are in the housing market.

3) ARM Mortgages

ARM mortgages (Adjustable Rate Mortgages) have been around for a while but were seldomly being used. They are used a lot for Jumbo Loans. With an increase in mortgage interest rates, many buyers are selecting an ARM option versus a fixed. The lower rate is offered to the buyer for the first part of the loan- typically somewhere between the 7–10-year mark, then a higher rate is taken on after that term.

4) Mortgage Buy Down

This option is VERY common right now and I would say is a mixture of both points and an adjustable rate in a sense. This type of buy down must come from the seller completely. The buyer is not able to pay for a formal buy down option. In this sense, the concession given by the seller- buys the buyers quoted mortgage down 2% the first year, and 1% the second year. The rate would then revert to the original quoted rate at the time of locking the loan. For instance, if the buyer was quoted a 6.5% rate and was utilizing this program, the buyer’s loan would become 4.5% the first year, 5.5% the second year, and then revert to the 6.5% for the third year through 30 (or 15 if it was a 15-year loan).
This option definitely provides THOUSANDS of savings to the buyer over the course of the first 24 months.

5) Gift Funds

Many loan programs do allow buyers to receive gift funds for down payment, closing costs, etc. There are also several grant and home loan programs for qualified individuals. We are always happy to advise of these programs in our buyer consultation or feel free to reach out for more. They do often change and have requirements (i.e., income requirements, industry requirements, etc.) but can always be a great option for those starting out needing assistance.