2-in-1 Mortage Rate Buydowns gain in popularity

Mortgage buydowns | mortgage rate news

Homebuyers look to mortgage rate buydowns

We’re inching closer and closer to the Spring homebuying season. Homebuyers are looking to apply for mortgages even with the current rate environment. For those looking to get into a home and still get an affordable rate, mortgage rate buydowns* have become a popular concession that homebuyers ask for.

“[Buyers] save massive amounts of money** in year one and in year two, even if they stick with the note rate, they have the first two years to get their finances in order,” said Evan Tando, CEO and Broker of Record at ANR Finance + Real Estate.

It’s important to keep in mind that mortgage rate buydowns are a concession that has to be negotiated with a builder or seller. The buyer will need to qualify for the rate, and the money won’t just go directly to them. It’s put into an escrow account. This actually benefits the buyer in case rates go down. It’s possible to refinance at a lower rate, and use the money in the escrow account as a credit. According to Tando, “This is money that you will never lose, even if you refinance.”

Which markets are out-of-market buyers targeting?

From investment properties to those looking to move, certain markets are just a bit more desirable than others right now to buyers coming from out of state. Metro areas in and around the Sun Belt gained popularity during the pandemic, and they’ve stayed hot into 2023. Areas like Tampa, Jacksonville, Charlotte, and major metro areas in Texas are among the most popular.
Dameion Kennedy, a real estate analyst with Lima One Capital, stated, “Local regulations for landlords in these cities, the property taxes, labor availability, population growth and local knowledge for specific investors to find properties has pushed these locales to the top of the list. These cities are cheaper than West Coast markets because of long-term prices and cost of living.”

In addition to citing the hot markets for real estate investors to buy, Kennedy’s firm also highlighted several metros in which investors have been selling. Areas like Memphis, TN, Jacksonville, FL, Macon, GA, ad Clarksville, TN have the greatest share of institutional investors looking to sell.

These popular metros could present a unique buying opportunity to a homebuyer looking to jump back into the market.

How can first-time homebuyers get creative to find a home?

The current housing market has been a challenge for even seasoned real estate investors to navigate, so it’s no wonder that first-time homebuyers are also seeing challenges. The team at Realtor.com has several strategies to help buyers land their first home.

A few ideas suggested include looking for a home that has a separate rental unit attached, trying to rent parking or storage, or looking to coordinate friends or getting a roommate.

While some of the creative suggestions may not be ideal for a growing family, they may make sense for a single individual. There are also several programs that first-time homebuyers can take advantage of to help make buying a home more affordable.

* Rate Reduce option available from participating builders and sellers on select properties.

Savings, if any, vary based on the consumer’s credit profile, interest rate availability, and other factors. Contact Guaranteed Rate, Inc. for current rates. Restrictions apply.

in 10 minutes?

The pre-approval process is lightning fast, and can be completed
in under 10 minutes. Grab a few important documents to get started.
  1. Tax Returns
  2. Copies of W-2s (or 1099s for independent contractors,
    freelancers and the self-employed)
  3. A payroll stub
  4. A bank statement
  5. Loan obligation info (student loans,
    auto loans and credit cards)

Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Restrictions may apply. 

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