The Benefit of Buying a Home When Mortgage Rates are High Means Lower Purchase Price and Less Competition  

The Austin, Texas real estate landscape is ever-evolving, and the current market conditions have brought about a significant shift from the cutthroat bidding of the last few years. Now with more stable prices and less competition from other buyers, we are encouraging our clients to buy. If you are a homeowner who is sitting on a lot of equity, trading up makes a lot of sense right now. 

SEED Market Insight: The last few years in Austin were dominated by bidding wars, sending prices to record highs, and making it feel impossible for many of our clients to buy a home. Heading into spring of 2024, we are seeing more open houses, better inventory, and more home deals outside of the city center. Central Austin is showing price resiliency with inventory still low in places like Hyde Park, Bryker Wood, North Loop, Allendale, and Brentwood.

With 30-year mortgage rates hovering around 6.7% as of March of 2024, home buyers are still facing challenges when it comes to affordability. However, with careful planning and a few strategic steps, you can offset the impact of high interest rates and still achieve your dream of homeownership, especially for first-time buyers. 

1. Improve Your Credit Score: A higher credit score can help you secure a lower interest rate. We encourage you to take the time to review your credit report, identify any errors, and work on improving your credit score now, not when you apply for a loan. We have seen time and time again where a client is unaware of an old bill that went to collections, like the cable box you forgot to return. 

Collections generally remain on your credit reports for seven years, and a mere $50 collection can impact your score by upwards of 100 points. When you identify something on your report, call the credit company to see about having it expunged. If that does not work, hire a credit repair company, especially if you have a number of issues to resolve on your credit report. 

2.. Shop Around for the Best Mortgage Rates: Take the time to shop around and compare rates from multiple lenders. Each lender may have different rates and terms, so it’s important to explore your options. We work with a number of reputable mortgage lenders who can help you with this process so just ask us.

3. Consider Adjustable-Rate Mortgages (ARMs): While fixed-rate mortgages are popular, especially when locking in a low rate, adjustable-rate mortgages (ARMs) can be a viable option in a high-interest-rate environment. ARMs typically offer lower initial interest rates for a fixed period, say three or five years, before adjusting. If you plan to sell or refinance before the adjustable period begins, an ARM can help you save on interest costs and you can capitalize on lower interest rates that are expected in years to come. 

4. Consider Points or Buydowns: Paying points or opting for a buydown is another strategy to offset high interest rates. Points are upfront fees paid to the lender in exchange for a lower interest rate. A buydown involves paying additional upfront costs to reduce the interest rate for a specific period. Calculate the potential savings and determine if paying points or a buydown aligns with your financial goals. We are seeing a number of home sellers offer 

5. Ask the Seller to Finance Part of the Purchase Price: Seller financing involves the home seller acting as the lender to provide financing for the buyer. Instead of obtaining a mortgage from a bank, the buyer makes regular payments directly to the seller over an agreed-upon period. Seller financing offers an alternative path to homeownership, providing flexibility for buyers and sellers alike. Making it a win-win solution. However, it is essential to approach seller financing with careful consideration, clear contracts, and professional guidance to ensure a successful transaction.

While high interest rates can impact affordability, there are several strategies home buyers can employ to offset these costs. By preparing ahead of time and understanding your options, you can increase your purchasing power and make homeownership a reality, even in a high-interest-rate market. 

Call SEED Property Group today and let our real estate experts explore ways we can help you achieve your dream of homeownership. 

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