OPTION #1

Do a buy-down. What exactly is a buy-down? Well, you’re going to see a lot more of that as prices stabilize and rates continue to rise, and as buyers are priced out of the affordability, they’re priced out of being able to buy a house or even make that basic mortgage payment. So when you talk to the lender and pay extra fees, points, or money for them to lower the interest rate, that is what the term “buy down” means. Let us suppose we have a loan of $500,000, and you purchase a home with a loan of $500,000. Furthermore, the current 30-year fixed rate is 6.5%. Hence, at that rate and amount, you might not be able to afford the payments, which total around $3,160 in principal and interest per month. We can do a buy-down if you don’t qualify for that loan or wish to lessen your payment. So we go to the bank and tell them, “Hey, we’ll pay you an additional point or $10,000 upfront,” which lowers the mortgage interest rate. As a result, instead of 6.5%, they can charge you 5.5%. And then your payment reduces to around $2,839, a difference of approximately $200 to $300. And all of a sudden, you can qualify for the loan or lenders will grant you the loan because it all comes down to your debt ratio or loan to value. And that $200 or $500 per month payment can get you the loan. And you might be able to afford that house at that price. Of course, this is only an example, but you might reduce that payment significantly. So this is one method to go about it. It’s known as a buy-down. And another thing you could do is recognize that the housing market has peaked, or about peaked and that it is taking longer to sell homes. Homes used to sell in eight days, or the “DOM” also known as “Eight Days on The Market,” at least in Anaheim Hills, California, a year ago. Then it went to 14 days. A home can now be sold in more than 30 days. It can take up to 45 days to sell a home in some locations. So when sellers quote, they panic and say, “What’s going on with my house?” And if they don’t lower the price, buyers can now make an offer and say, “Look, I’ll buy your house; I’m getting a 6.5 percent interest rate.” If you pay the extra lender fees or extra fees to buy down my rate, you can get 5.5 percent. Sellers are doing the same.

OPTION #2

Find the best loan package for you. Let’s return to the scenario where you’re purchasing a $500,000 loan-to-value home. As a result, it might be $550,000 or $600,000. However, in this case, we’re looking at a $500,000 loan. As an example, your payment on a 30-year loan at 6.5 percent was around $3,160. Instead of a 30-year fixed loan, you could now get a 40-year loan. Yes, they are and have been available, and I am noticing an increase in the number of 40-year loans. So, if you buy the same $500,000 house and choose the 40-year term or payment with the same 6.5 percent interest rate, your principal and interest will be $2,579, which is over $600 less payment for the same house at the same interest rate. And, of course, I’m providing you the interest rate to make the computation easier, but because it’s a four-year loan, they may charge you extra for the interest rate. However, if you check the comparison, your options are 30-year fixed or 40-year fixed, with lesser payments. If the times are right, or if your income or interest rates rise, you can always refinance and start the clock at 30 years or a 15-year mortgage when you are ready. As a result, this is a fantastic option. I believe we’ll see more of them as inflation and interest rates continue to rise, and lenders want to sell loans; they want to earn money; they want to keep their workers intact and employed, so they come up with more and more solutions. And I believe four-year loans are becoming increasingly common. They have been around for a while, but now that we are at a peak price, high-interest rate, and they’ve seen that buyers are backing off, buyers are not qualifying. Buyers want to buy a house with a high-interest rate. So in four years, you’re going to see more and more of that as an option. And as a bonus, I’ve also seen loans where not only is there a four-year loan but there’s also a four-year loan with interest only.

OPTION #3

Apply for an interest-only loan. Are they still alive? There are interest-only loans, but there are also 30-year plus interest-only loans and 40-year interest-only loans. So let’s see how it affects your ability to buy a property with an interest-only loan. So, consider the following scenario: you have a $500,000 loan with a 30-year fixed rate of 6.5 percent. Your payment totaled $3,160. But suppose you can’t qualify or the payment is too high for you, but you really want to purchase the house because you have the job, or you’re getting transferred, you want to move, and you really want to buy a house because you want to buy a house. You are a dreamer, and the most common American dream is to own a home. And you’re dreaming correctly: you want to buy this house, but you can’t afford the $3,160 down payment, and your bank won’t approve the loan. So you decide on an interest-only loan. In this instance, if you take a $500,000 loan and get an interest-only loan for 30 years, your monthly payment reduces to $2,290 versus $3,160. That means you’re paying $800 less per month for the same house and mortgage rate. And just like that, you can now afford a home.

Knowing your mortgage payment options, which banks to use, and who to contact is essential if you want to buy a house.