Did the rates drop yet?

If you find yourself wondering about the rates and seeing the news constantly talking about it, I want to break it down for you so you can find out what’s really going on. In the beginning of January 2023 the rates went up to almost 7% for a home loan. The rates came back down to 6.14% and have now raised slightly to 6.47% as of January 31st, 2023. 

Now if you’re thinking this is a high rate, let’s break it down even more to explain why this can still be a great time to buy:

According to Forbes, approximately 41.9% of home sales in the end of 2022 included sellers giving concessions to buyers. (Link)

What this means is that many buyers were provided concessions to pay towards closing costs and/or repairs. 

The down payment on a home loan can be as low as 3% of the purchase price, and closing costs are usually around 2.5% of the purchase price.

Let’s say you buy a $350k home; a 3% down payment would be $10,500, plus the 2.5% typical closing costs would be $8,750. So total to close would be $19,250.

Now let’s say I’m your realtor, and I negotiate on your behalf for the sellers to pay for closing costs. That means you saved money out of pocket!

However, on the other hand, if you wait for rates to drop, other buyers will also be flooding the market which means less negotiation power for you, the potential for multiple offers and paying above asking price again, and you will end up spending more money to obtain a home.

This all said, a great solution is to buy now, save extra on out-of-pocket fees, and refinance later when rates drop.

Even without a seller concession, you will be securing an asset at a good price, building equity, and securing a good rate before they could potentially go back up; or securing the asset before rates drop and the market floods with buyers, paying over asking price, allowing you to refinance without the competition on your home.

And to put it into perspective, the average mortgage rate in 1990 was over 10%. In the 2000s, mortgage rates have ranged from 4%-8%, so in reality, mortgage rates are not as bad as it’s being made to seem. And securing an asset is always a smart financial decision. Rent is at 100% interest, and you get 0% equity.

My goal is to always be transparent and to provide value. I suggest every buyer has a conversation with a great lender to determine what their purchasing power is and what the current rates are. Let’s chat about how we can get you into a new home in a way that makes sense for you.

*This blog is for informational purposes only. Jessica Gale is a real estate agent, not a lender and not a mortgage professional. This information and tips are based on personal knowledge/experience and information obtained from credible sources, such as Forbes.com. All information to be verified by the individual.

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