Mortgage rate news can be very confusing for first time, even third time homebuyers. Navigating the Mortgage Maze: Strategies for the 2024 Homebuyer offers some of the ways homebuyers are making the market work for them. Recently, the National Association of Realtors has warned of an even greater squeeze on affordability not witnessed in four decades. Where we have affordability issues front and center and a lack of inventory, prospective homebuyers are facing a challenging borrowing landscape. However, there are some borrowing strategies that you should be considering for homebuying in 2024. Where buying might seem out of reach, fluctuating rents will be even less affordable. Here are some of the ways to prepare yourself for homebuying in 2024.
Buying Discount Points
45% of home buyers in 2022 opted for discount points to trim their interest rates (Zillow).
What are discount points? It’s prepaying interest to reduce your ongoing mortgage rate. Each point is 1% of the loan amount, typically lowering the interest rate by 0.25%.
Calculate upfront costs versus long-term savings and factor in your homeownership duration.
Interest Rate Buydown
Builders, sellers, and some lenders offer a buydown to temporarily reduce your interest rate for the initial years. Crunch the numbers: Your payments may rise after the discount period. Compare mortgage terms with and without a buydown.
Adjustable Rate Mortgage (ARM)
ARMs are back in the spotlight. Fixed interest for an intro period, then it adjusts regularly. Tips: Seek a lower intro rate, choose a term aligned with your plans, and budget for potential payment increases.
Shorter-Term Mortgage
Opting for a 20- or 15-year fixed-term mortgage can mean lower interest rates. However, monthly payments may be higher due to the shorter term.
Assumable Mortgage
Take over existing payments. This is not a common option, as most conventional mortgages aren’t assumable. Look for sellers with FHA, VA, or USDA loans, whose mortgage can be directly assumed.
Final Consideration: Refinancing on the Horizon
Despite rates above 7%, refinancing isn’t an option for many. But stay vigilant – mortgage rates are cyclical. Monitor for a 1% to 2% dip below your current rate before considering refinancing.
Mortgage rates fluctuate, and opportunities for refinancing may emerge in the future. Keep an eye on interest rates, assess your goals, and decide whether it’s about lowering monthly payments or paying off your home sooner. Stay in the know on mortgage rates with Kimmy Rolph Real Estate and read more blogs like Navigating the Mortgage Maze in 2024: Strategies for the 2024 Homebuyer, here!