“How can I afford a house when rates are high?”
This is the most common question I’m hearing from buyers right now.
7% rates can feel discouraging.
But there is an upside, and a solution.
The upside:
Higher rates mean more inventory, less competition, and more negotiating leverage for buyers.
The solution:
Buyers can use that leverage to negotiate a credit from the seller. The credit can then be used to buy down the interest rate.
This is most commonly done with a 2-1 buydown, and it looks like this:
$500,000 loan amount
7% interest rate
$10,000 credit from seller
Year 1 – 5% rate(Saving up to $643/mo)
Year 2 – 6% rate(Saving up to $329/mo)
Year 3 – 7% rate (or option to refinance if rates are lower)
This allows you to ease into your new payment while saving money, and gives you the option to refinance when rates improve.
There are also options to permanently buy down the rate.
A buydown is more powerful than negotiating a lower sales price.
$10k off the sales price only saves around $60/mo, compared to over $600/mo with a buydown.
There are pros and cons to every market.
There are also always options and solutions.
Finding the right team to guide you can be the game changer.
