If you’ve been considering buying a home but have been holding off because you’re not sure if, in this market, it’s a good time to buy, here’s some good news. If your willing to work with a trusted real estate agent on a new construction home, you could end up in a very good situation.
By December 2020, the 30-year mortgage rate dropped to a new historic low of 2.68%, which created a feeding frenzy of buyers to the market. In an attempt to catch up with demand, man builders of new construction homes were standing up houses long before they were sold in anticipation of a continued hot market. However, rising interest rates have slowed things down a bit and as result builders have houses sitting for longer than they would prefer – this is bad for them but good for you as a buyer!
In an attempt to move these homes faster, some builders are offering great incentives for prospective buyers, such as lower interest rates (rate buy-down) for a period of time and money towards closing costs.
How It Works
Rate Buy Downs (a reduction in your interest rate) from a typical lender will cost you around 1% of the mortgage amount, per point reduced, up front. That means you’d have to pay this at closing to reduce your rate, which is in itself a great program, assuming you have the cash. You’re basically buying a lower mortgage payment by giving the lender some of the money they would make on the interest, up front. This can give you additional buying power.
However, when you do this through a participating builder, the builder pays the lender for those points to be reduced, not you. Now granted, these programs are temporary reductions in the rate, typically for 1-5 years, depending on the builder. But that could be all you’d need to wait out the current situation with the interest rates. Once the rates go back down, you could then contact a lender and apply to refinance the loan at the new, lower rate. It’s really a win-win for everyone.
Many real estate agents have access to the builder’s list’s of new construction homes sitting on the market and what incentives the builder’s are offering. Talk to your agent today and see if a new construction home could work for you!
Don’t have an agent you’re working with? No problem! Our team of profession real estate agents are available to take your call and answer any questions you have. Give us a call at (407) 680-4914.
