What a week for interest rates with one of the biggest drops we have seen in a long time! So let’s break down what happened and how you can take advantage of this small window of opportunity while it lasts! The Consumer Price Index data came out yesterday which is an indicator of inflation; and the numbers came out better than expected, which is why we’re seeing optimism in the market. This ultimately led to a huge drop in mortgage rates by over 2.5 points since Monday. What this means is that if you locked in a rate in the last few weeks on a purchase or refi, there’s a great chance you can either renegotiate your rate with your current lender or simply switch to a new lender at the lower market rates. Make sure to get a second opinion either way. Now we know that markets tend to overreact which is why there’s no way of knowing how long this window of significantly lower rates will last, so make sure to act fast and give us a call!
By now you may have heard about the popular 2-1 buydown that lenders are offering. Today we have a strategy for you to capitalize with this and save more money on your new home! The 2-1 buydown refers to using seller concessions to fund an escrow account and the lender will give you a 2% rate reduction in the first year and 1% rate reduction in the second year. This reduces your payment in the initial years of the loan. So here is the strategy – first, you negotiate for seller concessions to take advantage of the 2-1 buydown. We often advise using those for closing costs but they’ll fund the buydown here. So for the closing costs, the move is to actually take a higher rate than par to use lender credits to cover your closing costs. Now you’ve eliminated closing costs and your payment will be more affordable short term. Experts are predicting rates to tick down over the next year or two. So when rates drop, you refi to secure a lower payment and upon refinancing, you will also receive any funds still in escrow from the 2-1 buydown. We’re talking lower payment and less cash out of pocket upfront, then potentially a better loan in a year with some extra cash heading your way – all using other peoples money!
Boosting Your Credit Scores
Its Halloween and we are officially in holiday territory! We’re going to blink and its going to be 2023. So for those who are planning to buy a home next year, now is the time to get your plans in order. One of the most important aspects to buying a home in this lending environment is credit. Credit impacts the ability to qualify, the terms of the loan, and the ease of the process. Lenders are tightening on some guidelines so being proactive is the best way to achieve homeownership. If you’re looking to buy a home, here are the main aspects to boost your scores. First and always, make your payments on time every time. Second, if anything has slipped into collections, work to get those paid off either in full or get on a payment plan. Third, don’t open any new accounts if possible. New accounts like credit cards will actually drop your score in the short term but strengthen your credit over time. If you want to buy a home next year and want to get ahead of your credit, give us a call and we can provide all the resources to improving your scores!
Using Seller Concessions to Pay Closing Costs
Inventory continues to open up in the housing market as the market continues to shift toward buyers. Here is one small tip to help you keep money in your pocket if you’re looking to buy a home. When sellers are getting 10 offers on their home, they control the transaction. But when offers slow down, buyers can ask for more incentives. One of the most valuable incentives is called “seller concessions” or essentially a credit from the seller to pay for closing costs. For example, let’s say you are putting down 5% on a $400k home – That’s 20 thousand dollars. Then you factor in closing costs, that’s probably another $5 grand. Your total here is $25k out of pocket. You can haggle with the seller to drop the price a little, but your out of pocket will be a fraction lower. Instead, you can offer $400k with $5k in seller concessions which covers all closing cost and you just owe the down payment at closing which cuts your out of pocket by 20%. This is a great strategy to keep more money in your bank account where it belongs! For more tips, give us a call today.
Down Payment Assistance
This one is for all our home-buyers and realtors out there! We just got access to a Down Payment Assistance Grant that virtually anyone can be eligible for. And get this… regardless of income! One of the hurdles to buying a home for many is the down payment and that’s where Down Payment Assistance programs come in. The issue with most of those programs is that the money comes to you in the form of a loan. But this new Down payment assistance program gives our clients a GRANT to cover their down payment, not a loan, so it doesn’t have to be paid back. This isn’t ONLY for 1st time home buyers. There are no income limits. Almost anyone can be eligible. As long as you have volunteered or plan to volunteer in your community, you may be eligible. And they also allow up to 6% seller concessions to cover your closing costs. This means you could potentially buy a house for less money down than a security deposit on a new lease. If this is what you’ve been waiting for to buy a house, don’t wait anymore, give us a call!!
Savvy Buyer Behavior
Data from the national association of realtors confirmed that the housing market is cooling off and inventory is finally increasing. This presents opportunity for savvy buyers, but rates and uncertainty have many consumers still sitting waiting on the sidelines… You know who isn’t waiting right now? Real estate investors. When rates go up or there is uncertainty in the market, most consumers choose to wait, and this presents opportunities for savvy investors who come in and scoop up better deals since the bidding wars have finally stopped. Then, when the rates drop, they simply refinance into a lower rate and payment and increase their cash flow. If you’re waiting for rates to drop before you buy your dream home, you’re waiting for everyone else to also jump back into the market and restart the bidding wars. Savvy buyers can find opportunity when no one else is looking, and with our new down payment assistance grants, there should be no reason to wait! More on that to come next week! Give us a call to see how you can buy your dream home today!
Personal Savings Rate
The news this week was all about inflation coming in higher than expected in August. The CPI seems to be the big data point driving economic policy but there is a stat that actually hits closer to home: the personal saving rate. The personal saving rate is the percentage of household income that is left over after all bills, expenses, and taxes are paid. See back in 2020, the saving rate hit its highest mark in history during covid when spending was cut significantly. Now that were spending again and prices are up, the saving rate has dropped to the lowest level in over 10 years. You gotta buy groceries, you gotta pay the IRS, but the one factor that millions of americans can change is the amount of debt they carry. Low mortgage rates often save homeowners a couple hundred dollars on their house payment but even with rates rising, cash out debt consolidation loans have been saving our clients thousands of dollars per month. If you have credit card or personal debt, don’t be deterred by high rates. Freeing up cash is the key to financial stability in an unstable economy. Give us a call to see how much you can save.
Loan Limits Increased
We come with great news from the mortgage world this week. Fannie Mae and Freddie Mac are expected to increase the conventional loan limits to over $715k in 2023. The even better news is that are lenders are making an exception and allowing our clients to take advantage of these higher loan limits.. right. Now. Fannie and Freddie sent the conventional loan limits in each county in America every year. This then means that conventional guidelines apply to all loans within these limits. This increase represents an increase of over 10% year over year. So why is this important? Previously, if your loan limits were set at $648,000 in most counties, and if your loan exceeded that amount, you would need to get a jumbo loan. Conventional loans typically have better interest rates and are more lenient on qualifications which definitely favors prospective buyers and home owners. With the new limits, millions of home owners are going to be able to qualify for better rates and an easier process. If you’re looking for a new home, give us a call today.
Less Money Down & Lower Payment
Today let’s talk about creative ways to buy long-term real estate with less money down and still have a lower payment. So most lenders don’t tell you that you can choose from a range of interest rates. If you’re planning on keeping a home for shorter term, you want to pick the higher rates because you can get the lender to give you money towards closing costs. Who cares if your payment is 20-30 buck higher if it saves you a few thousand dollars in closing costs. But with clients who are worried about their payment and who plan to keep the house for a longer term, the better move may be to not put so much money down, and use that money to lower the rate so you save more over the long-term. For example, instead of putting 20% down, you can put 15% down and take some of the down payment money to lower the rate and since our PMI is so cheap, in most cases, you’ll still have a lower mortgage payment than the 20% down option. Want some advice? Talk to a pro. DM us or give us a call!!!
Student Debt Relief and Homeownership
The Biden administration has come through with some big moves to eliminate $10k in student loan debt for so many. Now how does this impact potential homebuyers??? Student loans are a hurdle for many that are looking to buy a home. One of the biggest factors to qualifying for a home loan is the debt to income ratio or comparing all monthly obligations vs all monthly income. Stating the obvious here but by eliminating debt, Biden just made it easier for many to qualify for a mortgage. There is more to it here though – Biden just increased purchasing power! Think about it this way, let’s say $10k in student loans equates to $300 in monthly payments. So if your max budget for your mortgage payment was $2000 before, by wiping out $300 in other debt payments, you can stretch your budget for the mortgage to $2300. This example equates to affording about and extra $50k on the purchase price. That could be the difference between settling for a house and buying a home you’re proud of. If you are looking to buy a home and have student loans, first give Joe some thanks and then give us a call!