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Marry the house, date the rate and divorce the landlord.
- The rate on a 30-year fixed mortgage are expected to fall to an average 4.5% in 2023, according to Fannie Mae.
- Rates have jumped more than two percentage points since the beginning of 2022, largely due to the Federal Reserve increasing borrowing costs.
- Consumers shouldn’t necessarily delay a home purchase if they find an affordable home they like now, experts said.
With interest rates rising, it is a time to get more creative with our financing. We sat down and talked to two of our favorite lenders to get their take on the market and the options.
Dean Wong with Cross Country Mortgage shared:
There is a new program called the 2-1 Buy Down, here is how it works. The Buyer qualifies under the actual start rate so they're within the 45% DTI and not overstretching but giving them a buffer to ease into the payment and/or buy time to refinance in a couple years. The Seller must buy down the point(s) for the Buyer to buy down the rate for 2 years.
Here is an example of a $1,000,000 purchase price with a 20% down and 2.5 point buy down.
Dean (loan advisor since 2001) says, "I’m in the belief that it’s a great time for buyers right now. Especially first time homebuyers. Much less competition, price reductions and more inventory. Rents are rising 10%+ as landlords are trying to make up for money lost from through covid."
Why does this also make sense for a Seller? If a Seller pays $25,000 toward the Buyer's 2-1 Buy Down, that is much better than reducing the purchase price $50k for their bottom line.
Victor Samaan with Wells Fargo shared other ideas, such as:
- Buying down the rate with points
- Interest only loans
- Adjusted Rate Mortgages versus 30 year fixed
Disclaimer: This video is for our clients only and not intended for publication on social media or public consumption.
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