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You Don’t Actually Need Mortgage Rates to Fall to Get a Lower Rate
A lot of buyers seem to be waiting for mortgage rates to fall before they make a move, but the market rate isn’t necessarily the only option.
There are a few ways buyers can potentially get a lower effective rate even while prevailing rates remain much higher:
• Taking over an existing assumable VA or FHA mortgage
• Using a seller-paid 2-1 buydown
• Permanently buying down the rate with discount pointsObviously, each comes with tradeoffs and they won’t work for every buyer or property. The assumable mortgage angle is especially interesting because some homeowners are still sitting on loans originated when rates were significantly lower.
This video breaks down how all three strategies work and some of the catches buyers need to consider:
Has anyone here actually used an assumption or seller-funded buydown recently? I’d be interested to hear how the numbers compared with just taking the current market rate.
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1 Reply
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You’re right. This is one of the most overlooked mortgage strategies. Most people focus on the Fed or the 30-year average, but your rate depends on many factors you can control.
Here Are Some Steps You Can Take Now, Instead of Waiting for the Market to Change:
Buy Down the Rate (Points)
- If you pay discount points up front, you get a lower rate for the whole loan.
- One point means 1% of your loan amount and usually lowers your rate by 0.25% to 0.5%.
- On a $400,000 loan, those savings add up.
- The break-even point is important, but if you plan to keep the loan, paying points and locking in your rate now might be better than waiting for rates to go down.
Shop Multiple Lenders Hard
- The difference between the best and worst offers can be 0.5% or even 1%.
- Try to get 4 to 6 quotes within 14 days so it counts as one credit check.
- Credit unions and local banks often offer better rates than big online lenders.
- Pay down credit card balances, fix credit report errors, and avoid taking on new credit before applying.
- These steps usually help more than waiting for rates to change.
Bigger Down Payment:
- Putting down 20% or more lets you avoid PMI, and lenders see you as less risky, which helps you get a better rate.
- Even increasing your down payment from 10% to 15% can help.
- A 15-year loan usually has a lower rate than a 30-year loan.
- If you can afford the payments, choosing the shorter loan term can get you a better rate.
ARM or Hybrid
- A 5/1 or 7/1 ARM usually starts with a much lower rate than a 30-year fixed loan.
- If you plan to sell or refinance before the fixed period ends, you can benefit from that lower rate with little risk.
Assumable Loans
- FHA and VA loans are assumable. If the seller has a 3% loan, you can take it over.
- This is one of the few real ways to get a low rate even when current rates are high.
Seller Concessions / Rate Buydown
- In a slow market, sellers might be willing to pay for a 2-1 buydown or cover permanent points to help close the sale.
- This extra money can reduce your rate.
Refinance Later, but Lock the Strategy Now
- Even if you accept a higher rate now, set up your loan so refinancing later is easy and affordable. Look for no early payoff fees, low closing costs, and only take cash out if needed.
- Waiting for the Fed is passive. People getting 5% rates in a 7% market use these strategies.
Questions to Ask Yourself
- Which of these options are you thinking about?
- Are you deciding whether to buy now or wait?
- Or are you already in a loan and considering restructuring?
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