Adjustable Rate Mortgages
Two Attainable Goals for Buying a Home in 2023
Any time can be the right time to buy a home with the right mortgage solution. Mortgage interest rates may have crept upward toward the end of 2022 and carried into the 2023 market but it shouldn’t hold you back from getting pre-approved for a loan program that will help you reach your homebuying goals. Keep in mind that experienced mortgage bankers have seen all kinds of market conditions. It’s worth pointing that because, although the COVID-era real estate market was straightforward and an easy environment in which to get a great interest rate, mortgage bankers have access to more programs, resources, and solutions that can withstand any market. Below are two mortgage goals that can be accomplished with the right tools.
Goal 1: Lock a Low Rate
All signs point toward rates leveling back down either later this year or early 2024. Have you heard something to this effect, causing you to consider postponing buying a home in 2023? Not so fast! Here are two explanations of mortgage interest rate solutions that will set you up for success in both the immediate and long term.
2/1 Buydown – It’s called a two, one buydown because the interest rate is lowered by 2% in the first year and by 1% in the second year, saving the borrower thousands within the first two years of their mortgage. A 2/1 Buydown is an upfront cost, paid by the seller, that allows buyers to lock in a lower interest today, saving hundreds per month, making buying a home in 2023 a great time. The idea is, at some point within the next two years, we can reasonably expect rates to come down. At that point, the borrower can refinance to a permanently lower interest rate.
Discount Points – Maximizing on seller incentives is key to buying a home in 2023. If you were to negotiate seller credits to cover the cost of mortgage discount points, they could be a smart move in today’s market. Mortgage points are an upfront cost to permanently lower your interest rate and the cost of each point is typically equal to 1% of the loan amount. Utilizing points to reduce the interest rate by half a percent will save a borrower tens of thousands of dollars over the life of the loan.
Goal 2: Afford More
Conforming Loan Limit – The 2023 baseline conforming loan limit is a whopping $726,200. In high-cost areas, the limit is even higher. Nashville, for example, is looking at a conforming loan limit of $890,100. Why is this exciting? Because a conforming loan is typically much easier to qualify for than a Jumbo Loan. Buying a home in 2023 means that buyers can get more house with less money down and less money in reserves.
ARMs – Adjustable rate mortgages have a lower, initial fixed interest rate for a period of typically 5, 7, or 10 years. Using an ARM for buying a home in 2023 increases buying power (or, how much house you can afford) by offering a lower monthly payment (because of the interest savings). And just as with the 2/1 Buydown, the borrower refinances to a permanently lower rate when the market moves in their favor. Now, that’s how to make a mortgage work for you.