Don’t Get Spoiled by Recent Interest Rate Reductions
However welcome they may be in the short term, lowered interest rates are not likely to last. This means that home shoppers need to consider ways to achieve the American Dream in a rising market interest rate. Among the time tested strategies are:
- Get your loan pre-approval before you start home shopping. Consider paying an additional fee to get a longer “lock-in” on a lower interest rate.
- Consider buying homes using “assumptions” or other creative financing arrangements. These are tricky and you’ll want an attorney to help you set up or review this broad variety of purchases. But with careful planning, and especially if you are rebuilding your credit and may not currently qualify for a traditional mortgage to buy the house you really want, it is worth exploring the world of “creative financing.”
- If you have a fair to good amount of money (generally, 5% or more of the cost of the home you want) to pay down on the sales price, ask your loan officer to help you with the math to determine whether you come out ahead making a larger down payment or making a smaller down payment but paying a fee to the lender called a “buy-down” to get a lower interest rate. The salient question in making that decision may be how long you think you will want to own the property before you sell it.
- As a variation on Strategy 3 above, consider asking your seller to pay “buy-down” points for you. They may want to reduce the closing costs they pay for you, but it could lower your future monthly payments significantly.
May 2019 be the year that you purchase your first home or your move up home! Let us know if you need a personalized strategy session!