Top Mortgage Hacks to Help Make Your Homeownership Dream a Reality!
By Laura Wehnes
When we talk about financing a home, we typically think about a 30-year fixed rate. While 90%of buyers still use this program, the mortgage industry has continued to change and add options to help more people get favorable financing to be able to enjoy homeownership and growing wealth through Real Estate investments.
In our current market, there are several mortgage options that are beneficial for people who
understand them and can use them in their favor.
BUY DOWN
The first of these options is a buy down. There are three options on how to do that and they
include, an interest rate buydown by paying points, a 3-2-1 seller buydown and a 2-1 seller buydown. These are good options for a seller to use as an incentive to a buyer in lieu of a price reduction. In the interest rate buydown option, a buyer or a seller can pay points to buy down the buyers’ interest rate for the life of the loan. In both the 3-2-1 seller buydown and the 2-1 seller buydown the seller has to be the one to pay for these benefits. This is another way to make a home more attractive to buyers who are looking for a lower payment for a few years as they pay off debt and/or start to make more money in their careers. It gives them a year or two to have lower interest before adjusting back to the locked in rate. There are set limits on buydowns for conforming loans.
LOCK AND SHOP
Another option for a buyer could be a lock and shop program. This type of program allows pre-
approved borrowers to lock in their rate for up to 120 as they shop for a property. They have the option to reset their interest rate to current market rates (60 day lock period) once the borrower has an executed contract. Many, but not all, lenders will allow this for both primary and secondary homes.
SELLER FINANCING
Seller financing is a great option for sellers who own the property outright or can pay off their
existing mortgage. This is a great option for people who would like to reduce closing costs for the buyers, save on capital gains and not have to pay insurance, taxes and maintenance. The benefit for the buyers is that they don’t have to go through a traditional lender, they make get more flexible terms and lower closing costs.
WRAP AROUND MORTGAGE
Lastly and the most complex one that will require understand on both the buyer and seller parts is the Wrap Around Mortgage, also knows as an All Inclusive Trust Deed. This is a form of secondary financing and includes the balance due on the existing note plus additional note for the purchase. The buyer makes one large payment and typically the seller splits that payment to the two mortgages and gets the benefit of the extra interest. It also helps the seller open up the buyer pool for buyers who may not be able to qualify for the whole amount. It helps buyers who may not be able to qualify for a traditional mortgage and can be lower than traditional lender fees.
These can all be great options to open up the buyer pool, give buyers the ability to pay less over the next couple of years and can financially benefit the sellers. These are available in the market, however, not every lender will allow them. Ready to buy or sell your dream home? Be prepared to to seize the opportunity by learning more about your mortgage options today.