Tired of waiting for good news to cut interest rates? Here's a strategy you can use to Beat Today's Rates!
As a Buyer it's tough enough to qualify for the home you desire let alone having to combat the slightest changes to interest rates and your kicked out of your previously attainable price range. What can you do to get all the home you desire?
First things first, speak with your lender to confirm they can include a temporary buy-down in your loan terms. Then once you've found the property you want and are in negotiations with the Seller, determine how much they will consider buying down your rate (1-3 years). Get it in writing, present the terms to your lender, and start saving!
What is a buy-down and how does it work?
A buy-down is a concession toward temporarily lowering the Buyers interest rate. It is essentially a concession that directly targets the interest rate for a set period of time. During the time the interest rate is bought down, the Buyer is only paying the difference of the remaining interest and the principle payment. Once the term of the buy-down is complete, the Buyers original interest rate is applied to the monthly payment and the Buyer will pay the rate at which they originated the loan at the time of Closing.
So if rates are currently 7.5%, you can receive a 2-1 buy-down which lowers your interest rate to 5.5% the first year and then the following year it goes to 6.5%, and the year after that you pay your regular 7.5% interest.
Benefits to Seller:
- More negotiable terms to favor your price range
- Keeps your buyer in the game
Benefits to Buyer:
- Lower Monthly Mortgage Payments
- Save on the first year or three on interest
- Excellent negotiating term to keep you in or get you under contract
- Buys you time to re-finance when rates do get better and you get to keep the remaining funds from the buy-down towards your refinance
Who can buy-down your rate?
- Seller
- Lender
- Broker
Sidebar: Some lenders are even offering 1-year buy-downs to incentivizes more buyers to come back to the market. If I were you, I'd use that as a starting point and negotiate for even better terms. Just food for thought..
So, who wins? You both do, both the Seller and Buyer benefit from buy-down options. The seller can sell at a more palatable price point. The buyer can afford to purchase the home they desire with lower monthly payments. The buyer also gets what we all need which is time. Time to allow for interest rates to be more favorable and re-finance when they are without missing out on the home today.
Contact me and we'll get you the best rate possible with the best strategies available.
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