Unlocking the Secret: How to Secure a 5% Mortgage for the Long Haul!
Meet Jack Church and his adventurous wife, Nicole, who took a bold leap from the sunny streets of Phoenix to the charming landscapes of northern Alabama. They were on the hunt for a fresh start, and what better way to embrace it than in an area boasting a booming economy and a cost of living that won’t break the bank?
With Jack’s roots in Tennessee and his career as a radio host flourishing in the Southeast, the couple was eager to return to their Southern roots, where their voices resonate loud and clear.
As they explored charming homes on the outskirts of Huntsville, they quickly discovered that new construction was not only appealing but also budget-friendly, thanks to enticing mortgage incentives from D.R. Horton. Just this September, they proudly clinched a deal on a stunning three-bedroom, two-bathroom abode for around $280,000. In a climate where average mortgage rates hovered around 6%, they snagged an incredible sub-5% interest rate that will benefit them for the life of the loan, with even lower rates for the first couple of years. Talk about a win!
“We scored big time,” Jack exclaims, grinning from ear to ear.
For those on the house hunt, the trend of mortgage rate buydowns—like the one that worked wonders for the Church family—looks set to stick around in the upcoming year. Although builders have hinted at a reduction in these enticing promotions, fierce competition from the existing home market might force their hand to keep these offers coming.
Curious about how to seize a mortgage interest rate deal? Check out this guide on buying down your mortgage interest rate.
Builders jumped into the incentive game in 2022 and 2023, aiming to lure buyers who felt the sting of high mortgage rates. As many homeowners cling to their ultra-low rates, existing home inventory remains tight, pushing eager buyers to the doors of new construction.
Experts predict that next year will bring a wave of older homes to the market, giving builders a run for their money and offering buyers a bit more leverage.
Builders are rolling out a variety of below-market-rate mortgages, usually requiring buyers to work with an in-house financing arm or a preferred lender. They often fund these attractive rates by purchasing blocks of loans upfront at discounted prices.
In a permanent buydown scenario, buyers can enjoy a mortgage set at a below-market rate for the entire 30-year term. Other options, like the popular 3-2-1 or 2-1 deals, offer lower rates for the first few years before adjusting to a higher rate.
While rate buydowns are a hit, builders have plenty of other incentives up their sleeves. Buyers—especially cash buyers—might find perks like closing cost assistance, top-of-the-line appliances, or upgraded fixtures.
“Promoting a great rate is our golden ticket,” explains Nanette Pfister, vice president of sales at Epcon Communities, a builder that jumped on the rate buydown bandwagon last year.
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