According to a recent Redfin report, housing inventory is at the lowest it’s been since May 2019—down by almost a whopping 40%. This, along with increased inflation, record-high home prices, and increased interest rates, has caused many homebuyers and sellers to put the brakes on buying or selling their homes.
As the saying goes, the only constant in life is change – maybe a move is inevitable due to a job change or a growing family, and you’ve found yourself on the fence and fearful of purchasing a new home in the current market. At Homestead Financial, we have some conventional and unconventional ways to help make housing more affordable and less stressful for both buyers and sellers. Here are a few strategies we use to assist in the process.
Permanent Rate Buydown
If you are selling your home and thinking about dropping or discounting your list price to offer a better deal, ask one of our loan advisors how a permanent Rate Buydown works. We can make the payment much more affordable for buyers by offering interest rates that were available two or more years ago through a buydown. Many of our customers have closed on their mortgage loans, with 30-year fixed rates in the 5’s and high 4’s, making the home much more affordable. Oftentimes, a buydown will be cheaper than what a price cut would cost a seller. This “special” interest rate will also make your house much more attractive to potential buyers. On the flip side, if you’re a buyer looking at a house that has been on the market for a while, it might be worth talking to your lender and the sellers about an offer that includes a permanent rate buydown.
Temporary Rate Buydown
This is a similar concept to the permanent rate buydown. The difference is that the interest rate is stepped up over time. What this means is that the rate would be 2% below the market the first year, 1% below the market the second, and back to the normal market rate the third year. This option is perfect for short-term buyers who do not plan on staying in their homes for a long period of time.
Lock & Shop
Interest rates are locked while watching the stock market. The rates move several times daily, so finding that magic time to lock in the perfect interest rate is difficult. Most banks require a purchase contract in order to lock in a rate. At Homestead, we offer our buyers a “lock & shop” option, which allows them to lock in the interest rate even before having their dream home picked out. This helps ease the worry about the ever-increasing interest rates we are experiencing in this current market. Sellers also love this option because it allows them to lock in their interest rate even before finding their new home.
Recast Loans
A Mortgage Recast allows a seller to buy a new home without having to worry about selling their current home first. If you have a lot of equity in your home but not a lot of cash to put down on a new home, or if you are concerned that with a limited down payment, your monthly payment will not be budget-friendly, then a mortgage recast may be suitable for you. You are able to purchase a home with a small downpayment; then, with a recast, the borrower makes a large, lump-sum payment on the principal of their existing mortgage after closing. Homestead re-amortizes the monthly payment based on the new principal balance and cancels the mortgage insurance (if applicable). You can purchase a new home in a seller’s market first, sell your home second, get a budget-friendly payment, and complete the process with just ONE mortgage transaction. On average, this option saves our customers $5k-$7k in closing costs and fees.
At Homestead Financial Mortgage, we know higher rates can cause a lot of confusion and stress when buying a home. If you’re debating if it’s a good time to buy or sell, we break down some of the benefits and costs of waiting till rates drop. Keeping these things in mind, combined with some of these tools, helps us allow more sellers to list their homes in today’s market comfortably. Reach out to one of our Homestead Financial Mortgage loan advisors for more details!