How can you still save on interest rates and buy your home? We all have heard the news about the interest rates going up. It’s a hard fact all buyers, sellers, real estate agents, and loan officers have to work with right now. However, it hasn’t been THAT long ago when interest rates were higher than this, and homes still were sold and purchased. Historically low-interest rates are still in our rear-view mirror … so how can you still save on interest rates and buy your home?
CASH BUYER
If you can purchase your home with cash, this is an excellent time! Home prices are declining, and you’re not fighting over homes like you had to last year or even a few months ago. A cash offer may be just the way to land you the home of your dreams.
ADJUSTABLE-RATE MORTGAGES
As mentioned in previous blog posts, an Adjustable-Rate Mortgage (ARM) may be worth looking at. ARMs initially have a lower interest rate when compared to fixed-rate mortgages. This is because ARM Interest rates are “fixed”, but only for a certain amount of time – like five or seven years. At that time, the rate will adjust (probably increase) depending on what the rates are doing. However, it is NOT a balloon loan. A balloon loan has a lump payoff at the end of its term, and a new loan needs to be taken out to continue the payment on the house or paid off. Balloon loans were what got us in trouble back in 2008.
If you do opt for an ARM and the interest rates see a decline, you can always refinance. It’s always best to talk to your loan officer when that time comes.
15-YEAR LOANS
Instead of opting for a higher rate interest rate of 30-year fixed loans, you may want to check out the 15-year loan. 15-year loans have lower interest rates than the 30-year fixed, and in paying your loan over 15 years instead of 30, your monthly payment would be higher, but you’re saving a ton of money on interest rates by paying off your home faster.
Paying off your home faster with a 15-year loan builds up equity in your home more quickly.
BUYING POINTS TO LOWER YOUR INTEREST RATES
This was popular when interest rates were 8% – 10%. You or you’d ask the seller to “buy points,” which would lower the interest rates. However, you will want to know that it may take several years to break even on buying down the points, so if you want to refinance at a lower rate a few years in, it may not be worth buying points. (unless the seller opts to pay for them)
It’s always best to work with professionals who can help you find the right home and loan. So give me and Dean Rathbun, United American Mortgage Corporation, a call today. Now is a great time to buy a home in the Desert!