Affordability is becoming a greater concern for would-be homeowners. With interest rates and prices escalating, it is easy for a home buyer to get discouraged. But there is hope! There are many alternatives for getting the loan you need within your budget on the home of your dreams. Here are some ideas that may help:
- Put more money down. With a smaller loan amount, the rates get better. For example, a loan amount of $175,000 now averages 7.25% to 7.50%.
- FHA loans have lower down payments, with as little as 3% down and lower rates. Rates now average 7.78% for a 3% down loan to 7.759 for a 30-year fixed loan with 20% down.
- Fannie Mae has a HomePath® program that offers foreclosed homes at a lower price to first-time buyers. Lenders can require as little as 5% down. Some homes may require repairs and some loan programs may not be available. To find out more, go to homepath.fanniemae.com.
- For luxury home buyers who are well-heeled, consider collateralizing your investment portfolio. According to The Wall Street Journal, investment lines of credit allow you to borrow against securities you already hold in your brokerage account. Interest rates are typically 1% to 2% over the Federal funds rate (now between 5.25% and 5.5%). Using this type of loan avoids selling assets and you won’t pay capital gains taxes. Normally, this type of loan can be completed in a week.
- Home State Bank is offering portfolio loans that are currently at 7.375%.
- Even if you do buy a home with an 8%+ mortgage, it is not forever. It is very likely that mortgage rates will come down in the next 1-2 years and you can always refinance your home when they do. You are marrying your next home, but only renting your mortgage.
A lot depends upon your credit score and your downpayment. If you are serious about buying a home it is essential to contact a mortgage professional, like Brad Harding of Home State Bank and get pre-approved. Call Brad at 847.287.8601. He can help you find the right fit and get you a competitive rate.