With rising interest rates, some buyers are looking for creative solutions to lower the cost of buying a home and offset a higher mortgage rate. Though there is little you can do to control the market, there are plenty of ways to make buying a home a realistic goal for you.
Looking for help buying a home in today's market? We can help! Contact us any time to learn more.
Seller Concessions
Current American homeowners have record breaking equity in their homes, with an average of $300,000 in equity. Because of this, many sellers are in a position to offer concessions that make the sale work for both parties. In recent years, requests for seller concessions were rarely met, but we are seeing that change as the market shifts.
Seller concessions are closing costs the seller has agreed to pay, a negotiable amount that cannot cover the entire cost but can help bridge the gap for buyers who are feeling stretched in the transaction. If the appraised value of the home is higher than the purchase price the seller needs to get, the seller is allowed to offer some of that additional equity toward closing costs, including discount points. For example, if a seller wants to get $500,000 for the house, but it appraises at $510,000, the seller has up to $10,000 available to be offered as a concession.
Discount Points
Discount points are one way to pay a bit more upfront to lower the overall cost of your purchase. Your lender may offer you the opportunity to purchase a discount point, where you pay a fee to purchase a lower interest rate. The cost is calculated as 1% of the overall loan value per point. For example, if you are buying a $500,000 home with a 20% down payment, you are borrowing $400,000. In this case, a discount point will cost $4,000.
Purchasing discount points can be a way to make a home affordable in spite of rising interest rates, and in some cases can be covered by seller concessions.
Gift of Equity
While not many people have the opportunity to do so, if you are fortunate enough to be buying a home from a family member you may be able to benefit from a gift of equity. This allows sellers to offer some of the equity in the home to the buyers as a down payment.
Let's say your parents own a home that has an appraised value of $500,000, but they only need to sell it for $450,000. This means there is up to $50,000 in equity in the home that they could choose to offer you in the form of a down payment gift of equity. It can also be used to help cover closing costs. Depending on the appraised value and the price for which the seller is willing to offer the home to you, you may be able to buy the home for as little as $0 at closing, including down payment and closing costs.
Down Payment Assistance Programs
Down payment assistance programs are another way to lower the cost of buying a home, especially helpful to either allow you to buy a home faster than you expected (because you don't have to save as large a down payment as expected) or keep more cash in your own pocket (handy for renovations, emergency funds, moving and furnishing expenses, or closing costs). The best way to find out if you might qualify for a down payment assistance program is to talk to a lender. We would be happy to refer you to some of our trusted lenders for more information!
To learn more about homes for sale in Carson City or Lake Tahoe, contact us any time!
