Adjustable Rate Mortgages
Two Attainable Goals for Buying a Home in 2023
Things to watch out for when buying a home in 2023 are interest rate and affordability solutions.
Goal 1: Lock a Low Rate
All signs point toward rates leveling back down either later this year or early 2024. Have you heard something to this effect, causing you to consider postponing buying a home in 2023? Not so fast! Here are two explanations of mortgage interest rate solutions that will set you up for success in both the immediate and long term.
2/1 Buydown – It’s called a two, one buydown because the interest rate is lowered by 2% in the first year and by 1% in the second year, saving the borrower thousands within the first two years of their mortgage. A 2/1 Buydown is an upfront cost, paid by the seller, that allows buyers to lock in a lower interest today, saving hundreds per month, making buying a home in 2023 a great time. The idea is, at some point within the next two years, we can reasonably expect rates to come down. At that point, the borrower can refinance to a permanently lower interest rate.
Discount Points – Maximizing on seller incentives is key to buying a home in 2023. If you were to negotiate seller credits to cover the cost of mortgage discount points, they could be a smart move in today’s market. Mortgage points are an upfront cost to permanently lower your interest rate and the cost of each point is typically equal to 1% of the loan amount. Utilizing points to reduce the interest rate by half a percent will save a borrower tens of thousands of dollars over the life of the loan.
Goal 2: Afford More
Conforming Loan Limit – The 2023 baseline conforming loan limit is a whopping $726,200. In high-cost areas, the limit is even higher. Nashville, for example, is looking at a conforming loan limit of $890,100. Why is this exciting? Because a conforming loan is typically much easier to qualify for than a Jumbo Loan. Buying a home in 2023 means that buyers can get more house with less money down and less money in reserves.
ARMs – Adjustable rate mortgages have a lower, initial fixed interest rate for a period of typically 5, 7, or 10 years. Using an ARM for buying a home in 2023 increases buying power (or, how much house you can afford) by offering a lower monthly payment (because of the interest savings). And just as with the 2/1 Buydown, the borrower refinances to a permanently lower rate when the market moves in their favor. Now, that’s how to make a mortgage work for you.
UHL Can Help
Thinking about buying a home in 2023? United Home Loans’ team of mortgage bankers are here to help. Contact us to get started!