Mortgage Demand Falling | Lenders MOTIVATED |First-Time Buyer Tips Mortgage Points Explained
According to Mortgage Bankers Association, mortgage demand is down 50% of what it was one year ago. Rates are high and home prices are high. Lenders are coming up with hacks in the lab to make your payments more affordable and earn your business.
So, let's look at common strategies used by lenders when rates are high to get you a payment you can afford. The biggest thing you MUST think about is, "is the program worth it?". "Will it work for me?" Let's look at ARMs, rate buy-downs, and refinancing.
ARM (Adjustable Rate Mortgage) - Your rate WILL change. Your rate is lower at the beginning and will increase as it matures. you can get 1, 3 7 year programs and the rate will adjust accordingly. Talk with your lender to understand the programs they have available. You need to be able to afford the ARM now and when it increases. If you can only afford the ARM now, what do you do when the rate goes up? Make sure you are able to refinance and/or sell if needed. What happens if you are not able to refinance? Make sure you do the math and understand what you are committing to.
Rate Buydown - You pay points to get your rate down to a more affordable rate than the current fixed rates. Always keep in mind YOU are PAYING for this buydown. You want to make sure that the amount you are paying is worthwhile for you. One point is 1% of the loan. Example:
$100,000 loan
5% original interest rate
One point = $1,000 -The rate will not go down 1% it may go down .25%. (talk to your lender about what is available for you)
The rate is now 4.75%
The mortgage payment is $550 at 5% and $525 at 4.75% (saving $25/month)
At what point does the $25/month add up to $1000
$1000 divided by 25 = 40 months. You will need to stay in the house 3.3 years in order to BREAK EVEN
Refinance - This is a great option if interest rates go down. However, you still need to consider what happens if you don't have equity in the house if you have low equity, if you lose your job, or if you transition jobs and no longer have continuity.
This is what I am offering you:
- Consultation
