Homebuyers can finally get a good deal in today’s housing market! The last few years have been tough on homebuyers – especially first time homebuyers. With the rising interest rates, the pool of buyers has been thinning out, leading to less bidding wars and more reasonable offers.
But, it’s not all rainbows and butterflies, these rates are the highest they’ve been since 2008, causing some buyers to have to adjust their budgets and even drop out of the homebuying process.
Luckily, I have the inside scoop on options buyers have in this market! Read on to find out how you can take advantage of this buyer’s market.
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How to get a deal in today’s housing market
Despite the new challenges home buyers face, my team and I found five ways to score a deal in this housing market.
1. Buy a new construction property
For the last few years, most developments were selling out like hot cakes. Certain communities even had waitlist for a chance to offer on a home! Due to this, builders stopped offering closing cost incentives and some even encouraged bidding wars.
Now that it’s shifted into a buyer’s market, builders are back to covering some (or even all) of the closing costs. Closing costs typically range around 3-4% of the purchase price, which amounts to thousands of dollars!
On top of the closing costs incentives, a select few builders are also paying to buy down the mortgage rate by utilizing “discount points”. These can cost thousands of dollars and in some instances lower the mortgage rate a full percent or higher (for example, lets say the standard mortgage rate is 6.5% some builders will offer to buy down your rate to 5%).
Another creative approach I’ve seen is a local builder’s lender offering a free refinance 2 years after the buyer purchases it. Rates are predicted to go down again within the next two years, so this will save the future homeowner thousands of dollars when they refinance.
Read: Everything You Need to Know About Buying a New Construction Home
2. Take over a seller’s mortgage
If you’re a VA or FHA homebuyer, you can take advantage of assumable mortgages! In layman’s terms, that means you could take over a seller’s mortgage and their lower rate instead of financing the home with a new mortgage at current mortgage rates.
There are a few caveats to this though. Most likely the seller owes less than what the property is worth. This means you will have to cover the difference in cash or potentially get a second mortgage or loan to cover the difference.
Not all VA and FHA loans will allow you to assume them, so finding the right property that has a VA or FHA loan on it could be tough. Be sure to clarify the stipulations with the seller’s lender as soon as possible.
3. Buy down your own rate
Some lenders are offering two options for buying down your mortgage rate. You could either buy down for the full 30 year mortgage, or buy down the rate for just two years and then it’ll revert back to the higher fixed rate for the remaining term of the mortgage. The latter option is cheaper, and it allows you to have a more affordable payment for two years and refinance later on down the road. Most people are predicting rates will start dropping again as early as 2024.
4. Look for a private lender
With the volatility of this market, some investors might be interested in the stability of lending to a homeowner rather than investing in the stock market. They would be guaranteed a steady cash flow and interest every month. Even if the private lender offers just 0.5% or 1% lower than the current mortgage rates, it is a huge savings that you can take advantage of.
Start reaching out to friends and family who are avid investors to see if it’s something they’d be interested in.
5. House hack
Is the rental market in your neighborhood strong? If so, then start looking at your home as an investment and look for one you could house hack. House hacking is when you live in part of the house and rent the rest out. So this could mean you’re living in one bedroom and renting the others out to roommates, or purchasing a multi-family property and renting the remaining units out.
Househacking will allow you to pay your mortgage down until it is time to refinance and obtain a lower rate.
There is always a way for homebuyers to get a good deal in a housing market, it might just require a bit of creativity! If you found this article helpful, please be sure to share it with your friends and family!
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