Strategies for Homebuyers to Secure Mortgage Rates Below 6%
Not too long ago, mortgage rates were at or below three percent. Unfortunately, rates have increased, and now homebuyers face higher rates, with finding a mortgage under 6.5 percent being quite challenging.
However, savvy homebuyers don’t need to be discouraged by a tough market. Homebuilders across the U.S. are offering incentives to reduce mortgage rates.
### Mortgage Rate Buydowns
According to NASDAQ, some builders are using a strategy called “mortgage rate buydowns,” which involves purchasing points from the mortgage lender. Builders pay an upfront fee to lower the interest rate on a loan, sometimes permanently. In some cases, builders can reduce mortgage rates to around six percent. This arrangement benefits both buyers, who get more affordable rates on new homes, and builders, who can sell their inventory more easily. To find out which builders are making these offers, contact local realtors for recommendations.
### Assuming a Mortgage
If you’re more interested in buying a home with some history, there are still ways to get reduced mortgage rates. Money.com explains that you can assume the mortgage of the home you want to buy. This means taking over the existing mortgage and paying it off based on the current terms and rates. However, you need enough funds to cover the seller’s total home equity (the price minus the mortgage balance). While not all mortgage types allow loan assumptions, government-backed loans like VA, USDA, and FHA mortgages often do.
### Comparing Lenders
Another option is to go directly to mortgage lenders. Taking the time to research different lenders can yield several price quotes, giving you more options. Don’t limit your search to similar types of lenders. Including online lenders, banks, and credit unions in your search might help you find more affordable rates. Credit unions, as nonprofit organizations, generally offer more competitive terms. Also, exploring any loyalty programs available through your current banks might help you find lower mortgage rates.
While it seems unlikely that mortgage rates will drop significantly soon, finding a rate under six percent isn’t impossible. With some planning, research, and effort, you can secure a mortgage rate that will help you get the keys to your new home.