3 Things Homebuyers Need to Know

New markets require new approaches and tactics. Working with a trusted real estate expert in your local area will help you make an informed decision for your future. 

Is now a good time for you to buy a home? The answer is “maybe” until you know all your options. Different motivators create the need to move for every individual or family. Don’t be fearful of fluctuating mortgage rates to put off your needs or what is important to you and your family. A trusted real estate advisor can help you navigate the market. There are many unique options, including affordability resources and creative financing, to help you move forward with confidence. The affordability challenge is real, but we’re here to help.

1. You can “buy down” a mortgage rate

High mortgage rates mean higher monthly payments — possibly too high for you. However, you can effectively lower your monthly payment by “buying down” the mortgage rate. There are several ways to do this:

• Paying points: In many cases, you can pay 1% of the loan amount upfront to lower your rate by .25% for the duration of the loan. This can reduce your monthly payment meaningfully if you have a little extra cash.
  
  
• Seller-paid buydown: It may be possible to negotiate a rate “buydown” paid by the seller. Here, the seller credits you an amount at closing that is placed into an escrow account your lender draws from over a set period of time, usually 1-3 years, reducing the amount you need to pay each month. Many sellers prefer this to reducing the sale price of their home.
  
  

Lender-paid buydown: This is typically done via what are referred to as “3-2-1” or “2-1” mortgages, in which the lender pays to effectively lower your monthly payment for the first 1, 2, or 3 years of your term. This is not an adjustable-rate mortgage (an ARM), but rather an upfront credit offered by lenders that is applied monthly for a period of time.

“We are encouraging buyers to think long-term,” said Jolene Weinstein, Head of Sales at Realty Austin | Realty San Antonio. “Home prices are not expected to fall dramatically in the long run, so buying a home now will still help you build wealth over time, especially if you plan to live in your home for several years. Another advantage of buying now is the lack of competition and opportunity to negotiate with sellers.”

2. You may be able to get grants or low to no-interest loans to help with your down payment or closing cost

There are over 2,000 down payment assistance and closing cost programs in the United States, and many right here in Austin. You may or may not qualify, but it’s worth checking, as most buyers don’t even know these programs exist. Down Payment Resource, a company that tracks these programs across the country, makes it easy for you to do a quick search of programs and check your eligibility.

3. You may be able to refinance to a lower rate in the future

There’s an old saying in real estate: “Marry the house, date the rate.” It’s misleadingly simple but does contain an element of truth. The average rate for a 30-year mortgage rate was less than 3% in early 2021. It is now over 7%. Many economists expect rates to continue to increase in the coming months as the Federal Reserve attempts to curtail inflation. At a certain point, this could place the economy into a recession, which typically induces the Fed to reduce interest rates. Of course, it is possible that rates remain high over a long period of time. There is a lot of uncertainty in forecasting this, so proceed with that understanding, and talk to a mortgage professional before making any assumptions.

Buying a home right now is tough, but we can help. Reach out to one of our local experts for no-pressure guidance.