A neighbor sent me a TikTok that said, “When your Starter Home becomes your Forever Home because you’re not leaving that 2.5% interest rate,” and ain’t that the truth, Ruth?
Currently rates are clocking in around 7.25% for a 30-year fixed loan. (I’m not a lender. I can’t give you a quote, but if I were leaning out a window at 227, that’s what I *might* have heard.)
Most Buyers are banking on refinancing in the future. But what are they doing in the present? Three things…
- Shoppin’ and droppin’. By getting quotes from several lenders, Buyers can sleep tight knowing they have the best rate possible.
- Paying points. Buyers can buy down their own interest rate by paying points. (1 point or 1% is approximately $8,000 right now. Again, not a lender.) If you buy down your own rate, it stays that way for the life of the loan.
- 2-1 Buydown. This is where the Sellers pay to buy down the Buyers’ interest rate. For the first year of the loan, the interest rate is 2% lower. The second year is 1% lower and the third year, the regular rate comes into play.
On the 2-1 Buydown in particular, the hope is rates will decrease within the next two years and Buyers will be able to refinance and lock in a lower rate long-term.
Is that even possible? According to US News & World Report, yes-ish. It depends on how low you’re looking to go. If you’re holding out for rates to dip below 5%, that’s not expected to happen until 2025. But it is expected to happen so let’s all just hug and high five and end this one on a high note.