Interest rates have gone up, yes, but that means sellers are more willing to budge on their bottom lines as there are fewer buyer shopping right now. This means seller assists are more common. I'll explain…
“Today I’m seeing a 6.45% interest rate”
I’m not a mortgage lender or financial professional (here are some of my trusted lenders that can further explain), but I have been sharing options with my buyer clients in this unique real estate market, as we’ve seen rates change substantially in the last 6 months.
Today I’m seeing 6.45% for standard conventional loans, although this can vary depending on the qualifications of the borrower.
Important to note, we’re still below the average rate of 7.75% over the last 50 years and with the estimated 6.5 million home deficit, there’s still more demand for housing than ever before as population growth continues.
Also, PMI fees (Primary Mortgage Interest), which are often required when buyer’s put down less than 20%, have been reduced recently, so many folks are paying these up front at closing as well, further reducing a monthly payment.
chart by Erika Giovanetti at money.usnews.com
So, how do you get the better rate? Seller assists.
Seller assists are funds paid by seller at closing. This amount varies and is capped at 3% of the sale price for Conventional loans and 6% for FHA loans. Seller net proceeds decrease by amount of assist.
These funds help pay for closing costs the buyer would incur. Those costs include lender fees, insurance, and escrowed taxes, etc.
Lenders charge points on a loan in order to buy down the rate of interest. A point is a percentage of the loan amount.
1 point = 1%
There are 3-2-1 and 2-1 year buy down options available. 3-2-1 means the first year you pay 3 points less, the second year 2 points less, and the third year 1 point less before assuming the current interest rate.
Essentially taking 1-3% of a seller assist and paying the lender buy down fee at closing to get a lower interest rate. Example below.
Assume you have a total mortgage amount of $612,000.
The good news is you could refinance if and when rates go back down, so it's a great option to get rates we were seeing the last two years, without as much competition, in a now buyers market.
Need More info on Financing Options?
Listen to Episode 7:How to get a mortgage - on the Philly Proper Podcast!
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