When Mortgage interest rates started to rise in the fall of 2022 it caught many if not all home buyers off guard. As rates rose quickly from the 3's to the 7's it quickly changed what had been a runaway train real estate market to the Little Red Train trying to get over the hill. As rates stagnated above 7% mortgage lenders had to come up with new and unique ways to bring affordability back to home buying.
More: See All Homes For Sale in the KC Metro
While rates have finally started to come back down, they are still high in comparison to the 3% days, unfortunately those day are gone and most likely not coming back anytime soon. So what is one to do? This is where those new and unique loan product come into play. While the 30 year and 15 year fixed rate loans are the most common, they also bring the highest rates since you will be locking in that money for a very long period. This is a great option if you plan to stay in the home for that length of time but what if your plans are for a shorter stay?
5/1, 7/1 & 10/1 ARMS - We see so many homebuyers go with a 30 year fixed rate even when they know they are going to live in the house for less than 10 years, it is probably the advise they received from parents or from other conservative financial planner posts. If you choose an ARM you can get a rate that is fixed for 5, 7 or 10 years, this is perfect if you are only going to stay for a period of this length, also in a declining interest rate environment there is a high probability of refinancing in the next couple of years. You will find that these loans can be 3/4 of a percent or more lower.
More: What Changes are in store for Real Estate in 2024?
2/1 Buydown - This has been around a long time but when interest rates were really low it didn't make any sense to use. This loan product allows you to buy the rate down for 2 years. You will usually see a 2% lower rate the first year and a 1% lower the rate for the second year with the hopes that you can refinance the 3rd year. The cost is usually a percentage of the loan amount and can even be paid for by the seller.
Professional Loans - Doctor? Lawyer? Nurse Practitioner? Mortgage Lenders want your business, most banks have a program that require little or no money down with extremely competitive rates for professionals in high paying careers. The Banks know the future income potential that comes with you professions and they want to earn your business.
Portfolio Loans - Banks have a ton of money to lend and they know that not everyone fits into the traditional box for a conventional Loan, FHA or VA Loan. That is why they create these portfolio loans that allows them to create the rules of who they lend to. These loans can be for first time buyers and can also have lower credit score or down payment requirement, many banks are even offering loans without a down payment required.
Just remember if you are looking to buy a house in 2024 you are no longer restricted to just Convention, FHA and VA financing. While these are still the most common options, lenders have hundreds of different loan products now to help you get a lower payment, help with down payment and credit score requirements.
Looking for a great lender? We have one that will be a great fit. Contact us and we will get you set up.
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