Tips in this changing market how to save money!

What’s up everyone?

As we all know, right now in mid October, we are in the midst of a changing market. Some places are still seeing multiple offers, like where I am in Montgomery County MD while other areas are seeing massive price reductions. 

One thing we all have in common is the high interest rates. Last I checked, they were right around 7%. So, if prices are still high (or too high for you with the higher interest rate) and you still want to buy, what should you do? 

Well, today,  I’m going to share some really amazing tips on how you can buy in this changing market and save some money.  

So, lets dive right in

1- First thing is to buy down the interest rate. And better yet, ask the seller or builder to contribute. Their feeling the changing market as well and we don’t know if it will get worse. If you buy down the rate, you are buying down your monthly payment for the duration of your loan which is traditionally 30 years. 

So, for example, if you bought a house for $500,000 with a 6.625% interest rate and 20% down, your monthly payment would be $2561

Now, if you buy down the rate by 2 points, your interest rate is now 6.125% and your monthly payment is $2430.  That’s a difference of $131 a month, $1572 a year. It will cost you $8000 to pay for 2 points but I’m hoping the seller will pay for them. 

And lets say you don’t have 20% to put down. Maybe you can get a VA loan and put 0% down! Let’s show you those numbers as well.

VA interest rate today is 6.25% so your payment would be $3149 with 0 down.  After you buy it down by 2 points, the rate is 5.49% and the monthly payment is $2901, a difference of $248 a month, and almost 3k a year!

Big difference and definitely worth it in this market. 

2- Negotiate seller help. Back before the pandemic, when we had a more balanced market, it was quite normal for buyers, especially first time buyers, to ask for seller concessions to help them with their closing costs.

Here in Montgomery co md, a buyers closing costs are around 3%. 

So negotiate 3% credit from the seller that will go towards the buyers closing costs. Always verify with your lender first to make sure they allow it.

That 3% includes everything from transfer and recordation taxes, to lender and title fees.  Or you can use it to buy down your interest rate!

3- Negotiate inspection. If you are doing an inspection and have it as a contingency, definitely negotiate the inspection when things come up. And they always come up. Remember, in most places, if something is found out during the inspection, the seller will most likely have to fix it anyway or disclose it to the next buyer if your contract falls through. So, negotiate it and maybe if you think you can fix it yourself, ask for a credit instead of repairs. 

That credit can be used to offset your closing costs or maybe help you buy down the loan.

4- Title insurance. I’ve saved so much money for my clients over the 19 years I’ve been a realtor with this next tip. Ask the sellers for a copy of their title insurance. If you can get it (and you have to ask), then ask the title company for a reissue rate. Depending on how much the house cost when the seller bought it is how big a discount you will get. 

And if the seller can’t find it, ask them where they closed on their house. And then ask that settlement company for a copy. It’s worth it!!

5- See if there are community grants or city grants/programs. You would be surprised how many places offer different grants for first time buyers that can really help. I had a client recently that got a grant from BOA that gave him 17k to help him pay for closing costs (including buying down the rate) and for a down payment on the house. Here in Washington DC, we have HPAP Home Purchase Assistance Program which offers interest-free loans and closing cost assistance to qualified applicants. So, definitely ask around, ask your lender or realtor if there are grants or programs that you could qualify for.

So thats my top 5 tips. Some  other things to note, the more money you save and put down as a down payment, the lower your interest rate will be and of course your loan amount. Same goes for your credit score. The higher it is, the better rate you will get. So def get your house in order and give yourself the best opportunity to save the most money when buying a house. 

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