Two Things Home Buyers Need To Know If Purchasing This Year

If you plan to buy a home this year, there are two things you should know.

Tim Moldenhauer is here with RE/MAX Associates and The Moldenhauer Group.

We see advertisements all the time that say it’s a great time to buy. The truth is that depending on your circumstances, it may or may not be true.

One thing we know for sure is that for buyers getting a mortgage, the higher mortgage rates will mean higher payments. The reduction in home affordability is real.

There are options out there that I would like to tell you about.

for those of you thinking about buying a home. You can "buy down" your rate. We will cover the three most popular options next.

First off, you can "pay points." This is the payment of an upfront fee called "discount points," where each point is 1% of the loan amount. For each discount point you pay upfront, your fixed rate will be reduced by approximately 1/4 of a percent. This will be for the life of the loan.

The second way is that a seller paid to buy it down. Similar to the above situation, in this scenario, we negotiate a credit with the seller on your behalf. This credit is used to pay for the discount points. This has been very common for the clients we have represented this year. Putting more money back in the buyers' pockets.

The third option is a 3 2 1 buydown, or sometimes a 2 1 buydown. This is a financing option that lenders offer where there is a temporary reduction in the rate.

For example, in a 3:2:1 buydown, the rate may be reduced by 3% in the first year, 2% in the second year, and 1% in the third year. After the end of the buydown, the rate would return to the original fixed rate.

The cost of this option, which is the total reduction of interest, can be paid by either the buyer or the seller.

This can be very helpful for buyers who want to keep their payments down during the first few years of owning the home.

The second thing buyers should know is that whatever rate you choose doesn't have to be permanent. It is estimated that between 40 and 50% of mortgages are refinanced. This means that if the rates drop in the future, you can get a new loan at the conforming rate.

If you would like to discuss this in further detail or have any questions, please feel free to reach out.