| Rates are up, supply is down, and competition is brutal leaving many home buyers feeling discouraged and indefinitely sidelined. Just to make it rain a little harder, home prices have regained upward momentum and mortgage rates are stuck between 6% to 7%.
With that slap of reality out of the way, here are four solutions to cure home buyer blues with added savings for first-time buyers and the ability to eliminate mortgage payments entirely for older borrowers.
Interest Rate Buydowns
Rate buydowns are an efficient way to add momentum to a listing while simultaneously providing buyers a below market mortgage rate for the term of the buydown or the life of loan. The result in most cases, a buydown creates more benefit for the buyer at a lower cost to the seller versus a price reduction or trying to time the market.
Highlights:
- can be permanent, lowering the rate for the life of the loan or temporary, buying a lower short-term rate with a path to refinance in the future
- typically a seller funded incentive to buyers
- cost savings to the seller versus taking a straight price reduction
- A 2/1 temporary buydown allows for a principal reduction should rates drop and the loan be refinanced within the 2-year term of the buydown The detail on how they work.
Fairway’s Cash Guarantee
In a recent chat with a bank executive, I was asked to repeat my statement that Fairway offered a cash guarantee to any qualified pre-approved borrower seeking to solidify their stance as the best choice in the eyes of a seller. His response, in today’s market, that’s a huge advantage.
Fairway’s Cash Guarantee program assures the seller that if a loan does not close for a financing reason, Fairway will purchase the property. The cash guarantee literally makes an offer from our pre-approved borrowers as good as cash. Here’s how it works:
- Seller will receive a cash guarantee from Fairway upon borrower qualifying
- Buyer’s offer as good as cash
- No additional fees to utilize the program
- If the guarantee is triggered for a financing reason, seller has the option to keep their home plus a $10,000 check from Fairway if the contract is terminated
- Borrowers must have completed the Fairway Advantage Pre-Approval
- Available on FHA, VA or Conventional loans
- Available only on single-family residences
Don’t let buyers lose against “better qualified” competition, make them cash buyers.
First-Time Home Buyer Added Savings
The Federal Housing Administration (FHA) reduction in the annual mortgage insurance premium on all 3.5% down first-time home buyer (FTHB) programs equates to a savings of $1,350 annually at a purchase price of $450,000. This is one of several steps taken to make qualifying and affording a home more attainable.
Capitalize on the following FTHB incentives and flexible guidelines:
- Include a non-occupant co-borrower to improve qualifying ratios
- All or a portion of the down payment can be gifted from a relative
- Down payment funded with a 401K accepted
- A reduction in mortgage insurance premium on 3.5% down FHA loans from 0.85% to 0.55%
- Minimum credit score of 580 with no associated rate premium
- Seller may contribute up to 6% of the closing costs
- Debt to Income ratios up to 55%
- Loan limits for Portland Metro area $672,750 (vary by county)
- Bankruptcy acceptance after 2 years (terms vary)
Home Equity Conversion Mortgage (HECM) for Purchase
At the opposite end of the buying spectrum, FHA’s Home Equity Conversion Mortgage allows buyers age 62+ with a 50% or greater downpayment access to a non-recourse FHA insured loan making mortgage payments optional for as long as they occupy the home. Borrowers are responsible for maintaining the home and must pay property taxes, insurance and HOA dues if applicable.
Benefits:
- HECM for Purchase loans often result in a listing and purchase transaction for the same agent
- Provide an affordable avenue for buyers age 62+ to move closer to family by simultaneously eliminating a required mortgage payment
- Secure the ability to age in place including a non-borrowing spouse
- Broader qualifying criteria for those no longer receiving employment income
- Supplement monthly cash flow preserving portfolio invested assets and potentially delaying drawing on social security benefits
- Enhanced consumer protections
Fairway has delegated underwriting authority for all FHA programs and in-house underwriting on conventional loans ensuring quick turn pre-approvals and guidance through all terms and conditions.
Forecasts continue to indicate rates should begin drop before year end. In the meantime, there are solutions to make buying more affordable, now. |
