What can Buyers do as interest rates continue to climb into 2024?
By: George Castro, P.A.
As interest rates continue to increase, what can Buyers do to navigate the affordability crisis facing Florida?
It's no secret that buyers are climbing the interest rate mountain and are facing all time expensive payments due to high priced real estate. Are there ways for Buyers to navigate the inevitable rate hike as we approach 2024? Here are some resources to help Buyers climb safely and information that can help ease the expense with Buying in 2024.
Interest rates are now topping 7% and there maybe another rate hike coming soon. One approach Buyers are utilizing is a temporary mortgage rate buy-down and commonly used with pre-construction builders. In the form of a credit to the Buyer, Sellers can assist the sale with paying the Buyers interest payment rates upfront. By doing so, the Buyer can save money (typically 24-36 months) of interest payments, which means a savings on monthly mortgage expense. By using this type of term, the Buyer will receive a temporary ease and give time for the market rates to stabilize, which can give an opportunity to refinance, when the time is right.
Paying discount points to the lender is another option that Buyers are seeking in 2023-2024. By paying discount points, the Buyer can permanently reduce the interest rate by 1% or more. Again, Buyers can negotiate to have Sellers give contributions as a form of a credit at the time of closing towards discount points. With a current 7-8% interest rate, paying discount points by one point (or 1%) can significantly help your monthly mortgage payment.
Seek a "seller financing" deal. Asking for the sellers to finance the deal can give both the Buyer and Seller an advantage. The Seller will receive monthly payments directly for a typical term of up to ten (10) years and the Buyer will receive a much lower rate term. A Buyer would need to mortgage the balance within a specific term. This type of term loan is a bit complex and it is in the best interest of all parties to have an attorney to produce a contract.
Paying off debt is a great way to help ease Buyers with high interest rates. By paying off old debt, a Buyer can help their debt to income ratio (DTI) which is what qualifies Buyers as commendable candidates for lenders and ultimately help secure home loans. With a lower DTI (36% or lower is key) Buyers can apply more money towards their mortgage payments.
These are just a few ways that Buyers are using in todays market. Don't wait to buy! If the Federal Reserve reduces rates, this may cause a flood of buyers to react thus causing a competitive buyers market. If you are looking for more ways to save and need to buy, contact me today!
Disclaimer: This article is not to be construed as legal advice. Always be sure to consult with a real estate Attorney.
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