The last couple of weeks have not been nice to interest rates. Rates have risen for the seventh straight week as higher Treasury yields and expectations for more Fed rate hikes have kept pressure on borrowing costs. We can’t help what is going on with interest rates but we are trying to keep options open for those buying homes.
There are a couple things to look at if you are trying to figure out the best plan for your next home. Talk with your loan officer about buying down the interest rate. For some this can make sense. Look at the cost to buy the rate down and how long it takes to recoup the cost.
Another option is a temporary buydown. I have had clients that have seller paid closing costs and we use some of that money to do a temporary buydown. This means the rate is 1-2 points lower for the first year or two depending on the buydown plan. If you do a 2-1 buydown, the first year your rate would be two points lower. So if you lock at 8.0%, the first year your payment would be based on a 6% rate, the second year it increases to 7% and the remaining term is at 8%. If rates would drop enough to make a refinance make sense, you would be able to use the money that was left on the buydown to lower the mortgage balance. This is another option to talk with a loan officer about.
Some people are looking at adjustable rate mortgages. This is an option depending on how long you plan to keep the home. There are 3, 5 7 and 10 year adjustable rates. This means the rate is fixed for the first few years (3, 5, 7 or 10 years) and then becomes an adjustable rate after the initial term.
Mortgage rates are at their highest since November 2023. More rate hikes could be coming. Right now investors do not expect a rate hike in October but there may be one in December. The concern is inflation. Oil prices are definitely playing a role in interest rates.
Please reach out if you have questions. I would love to help you figure out the best way to get into a new home!
Leslie Vanderwerf, NMLS ID#335509, CrossCountry Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website
