12/3/24 – Late Afternoon Mortgage Update

Before we get started, please read the information below on what the insurance company at Village Walk was able to do to make the complex warrantable! THIS IS AMAZING!!!

The Waiting Game: Helping Your Clients Navigate Interest Rates

For the past three years, buyers have been sitting on the fence, waiting for interest rates to come down. While the future is uncertain, a strong consensus suggests rates could dip into the 5% range in 2025, with some even predicting they could slide into the 4% range. While we can’t guarantee the future, we know today is an opportunity to help buyers move. One tool to encourage hesitant buyers is the temporary Buydown.

Let’s explore the options and strategies to get buyers off the fence and into their dream homes.

Permanent vs. Temporary Buydowns

Permanent Buydown

A permanent buydown lowers the interest rate for the life of the loan by paying points upfront. For example:

• Today’s Rate: 6.50% with no points.
• Pay 1 Point: Reduce the rate to 6.125%.
• Pay 2 Points: Reduce the rate to 5.875%.

While this sounds appealing, a permanent buydown only makes sense if rates are expected to stay high. This strategy may not be the best option when rates are likely to drop shortly. Instead, avoid points when possible and focus on temporary buydowns.

Temporary Buydown

Temporary buydowns offer buyers short-term relief with lower payments in the first year or two of the loan, making it easier to buy now while rates are higher. These buydowns can be funded by the seller or the lender.

For example:

• Standard Rate: 6.50%
• Temporary Buydown Rate (Seller-Paid):

• 1. Year 1: 5.50%

• 1. Year 2+: 6.50%

• Temporary Buydown Rate (Lender-Paid):

• 1. Year 1: 5.875%

• 1. Year 2+: 6.875%

If the buyer refinances within the first year, they may receive a refund on unused buydown funds. For instance, on a $500,000 loan, the buyer could save over $200/month in the first year and get a refund of approximately $2,000 if they refinance in month 7.

Seller-Paid vs. Lender-Paid Buydowns

Seller-Paid Buydowns

This involves negotiating with the seller to cover the cost of the Buydown. However, seller contributions are often factored into the purchase price, meaning the buyer might end up with a slightly higher loan amount.

Lender-Paid Buydowns

Lender-paid buydowns remove the need for seller contributions altogether, saving the buyer money without impacting the purchase price or loan balance. This approach often provides the best long-term savings for the buyer.

The Bottom Line for Agents

As real estate agents, you have the power to guide your buyers toward creative solutions that make homeownership more affordable, even in today’s high-rate environment. Temporary buydowns - whether funded by the seller or the lender - are a great way to ease payment concerns while setting the stage for a refinance when rates improve.

I’m here to partner with you and your clients to explore every option, ensuring they feel confident and supported throughout the buying process. Let’s get those buyers off the fence and into their new homes!

If you’d like to learn more about temporary buydowns or other strategies to help your buyers, reach out. Together, we can turn today’s challenges into tomorrow’s success stories.

I am available all week if you need anything. Let me know if you have any questions or if someone is interested in buying a property. My cell is 661-714-6258, and my office line is 661-260-2970 ext. 2222. My direct line is 661-291-2222. When you text me, please text (661-714-6258) or email me at Mike@AugustaFinancial.com.

But wait, there’s more!

Interest rates are flat this week, but there is some talk that they will be coming down! Time will tell!       

• 12-day escrows if your buyer is pre-approved - Conventional / FHA / Jumbo / Bridge
• We do loans in all states, so call me with anything you need.  
• Government Loans (FHA / VA/ USDA) are in the 5’s and 6’s.
• Conventional Loans up to $806,500.00 are in the 6’s
• High Balance Loans $806,501 – $ 1,209,750.00 are in the 6’s
• Jumbo loans above $1,209,750 are in the mid to high 6’s
• Bank statement loans - They are available with 10% down again, and larger down payments are in the 6’s.
• Profit and Loss Statement loans – 20% down – You don’t need bank statements, just a profit and loss statement!
• 0 down loans are in the high 6’s – 620 credit score min right now, up to $1,250,000.00.
• Private Money lenders - Hard Money Loans – 35% down!
• No Ratio Loans 30% down
• DSCR – Debt Service Coverage loans with as little as 15% down
• Bridge Loans - typically 7.99% with limited fees – and they get you where you need to go!
• 3/2/1 Buydowns 2/1 Buydowns and 1/0 Buydowns are available at great start rates!

Interest rates are subject to change without notice. The above are LA County Loan Limits.

Good News / Condos – Village Walk – They just renewed their insurance policy, with a $25,000 deductible per unit. Still, the maximum deductible shall not exceed 5% of the total limit of insurance! Doing this to every policy would be a Christmas miracle!

Bad News on Condos – NA

All other naughty condos have been moved to MikeMeena.com. I will post updates here, but all the information on the naughty list is on my website. Just go there and click about, and you will find our most updated list.

Please let me know if you hear anything new on condos or townhouses.

I am still available all week if you need anything. Let me know if you have any questions or if someone is interested in buying a property. My cell is 661-714-6258, and my office line is 661-260-2970 ext. 2222. My direct line is 661-291-2222. When you text me, please text (661-714-6258) or email me at Mike@AugustaFinancial.com.

Have a great day and an even better tomorrow. Please call me when you have a client who needs to borrow!