Work Around High Interest Rates

There’s nothing but buzz around the housing market right now. With national interest rates above 7%, it’s easy to see why experts like CNN are saying it’s a terrible time to buy a house. But as Baird & Warner’s very own agent Jackie Lafferty says “even if sales slow down, real estate doesn’t stop. People need a place to live.” 

While headlines will continue to shed some gloom on the housing market, it’s important to remember that there are more perks to buying than renting – even with such high rates. We laid out some explanations in our blog “If You’re Still Renting, It May Be Time to Buy,” where we get into the benefit of building wealth, the outpricing of renters and so forth. If you’re already thinking it’s time to buy but you’re just not sure you can afford it with these rates, we’ve got ways to work around that. 

First, consider a mortgage buydown. 

If you have a little more money to spend upfront, a mortgage buydown might be a great option for you. A mortgage buydown allows borrowers to reduce their effective monthly payment for a limited time through a buydown of the interest rate. With this option, the seller can provide a closing cost credit that the buyer can put in an escrow account to pay down their rate temporarily or permanently. 

This is broken into a few options. You can do a 3/2/1 Buydown, a 2/1 Buydown, or a 1/0 Buydown.

  • 3/2/1 Buydown
    Using the initial note rate, the first-year rate is 3% below, the second year is 2% below, the third year is 1% below, and the 4th-remaining term is the note rate.
  • 2/1 Buydown
    Using the initial note rate, the first-year rate is 2% below, the second year is 1% below, and the third-remaining term is the note rate.
  • 1/0 Buydown
    Using the initial note rate, the first-year rate is 1% below,  the second-remaining term is the note rate.

Utilizing a mortgage buydown can be a great option to save thousands in the long run and get your dream house without breaking the dream budget. 

Consider IHDA Assistance.

Another financial option is to look into assistance from the Illinois Housing Development Authority (IHDA). Currently, they have an Opening Doors Program which provides $6,000 in down payment assistance to anyone looking to buy a home – not just first-time homebuyers. The loan is a 30-year fixed conventional FHA or VA that is currently priced well below the market. The best part? It’s typically forgiven over a five-year period – meaning you don’t need to pay the $6,000 back. 

Here’s a little bit of what you need to know about the Opening Doors Program qualifications. 

  • $6,000 in downpayment or closing cost assistance that is fully forgivable
  • Available to both first-time and repeat buyers
  • Allows for one to two-unit financing (including condominiums!)
  • Contribute $1,000 or 1% of the purchase price, whichever is greater

Talk to a financial expert. 

Toto, we’re not in 2020 anymore. The housing market isn’t as clear-cut as it was just a year or two ago, and the interest rates reflect that. But the truth of the matter is renting isn’t a better option. If you’re looking to buy a home but aren’t sure how to go about it financially, you need a skilled loan officer to help put the pieces together. Baird & Warner’s financial partner Key Mortgage can help. Work with someone who not only provide you with options you may have never heard of, like mortgage buydowns or IDHA assistance, but will also take the time to explain the nitty gritty and get you the best deal possible. There are ways to work around high-interest rates – we can help. 

Written by
Categories
Archives

SUBSCRIBE

RECENT POSTS

DAILY NEWS

Stay Connected

Get the latest news, stories, and advice from the Baird & Warner blog delivered straight to your inbox.

MONTHLY NEWS

Stay Connected

Get the latest news, stories, and advice from the Baird & Warner blog delivered straight to your inbox.

AGENT NEWS

Stay Connected

Get the latest news, stories, and advice from the Baird & Warner blog delivered straight to your inbox.