How to make your homebuying dreams come true
The past couple of years have been a wild ride for the housing market. With historically low mortgage rates, buyers were entering the market at an unprecedented rate—a rate so fast that supply couldn’t keep up with demand. As the pandemic progressed, prices soared while homes were swept off the market within hours.
Eventually, mortgage rates increased as well, making 2022 the year for increases in both home prices and mortgage rates—a costly combination that caused many buyers to retreat to the sidelines hoping for better luck next year. But now that next year is here, many of the homebuying headlines are painting a grim picture of the housing market.
If your goals for 2023 include buying a home, you might be wondering if you’ve set yourself up for failure. But it’s not all doom and gloom out there. With a little planning ahead, and a whole slew of loan options and programs to offer, we can help you reach that 2023 goal of getting into the home of your dreams.
So, what can you do if you were hoping to make 2023 the year for homebuying success?
Try for a temporary buydown
Giving you the peace of mind that comes along with a fixed-rate mortgage, this option allows you to keep your payments low for the first year or two of your loan but still know exactly what all your future payments will look like.
An upfront deposit at closing allows your mortgage rate to essentially be “bought down” for a specified period of time. This upfront deposit can come from sellers or builder partners. We offer five different Rate Reduce programs to help you ease into your new home and mortgage payment as you build equity.
It’s often during the first few years in a new home where owners are looking to make purchases that help to make a house a home—furniture, fittings and accessories, paint projects, etc.—but it’s not necessarily an ideal time to be adding extra costs to your budget. Our Rate Reduce programs can help to give you a little breathing room while you’re just getting acclimated to your new monthly mortgage payment.
Amplify your options with an ARM
Similar to our buydown programs, ARMs (adjustable-rate mortgages) offer the potential for lower monthly payments at the beginning of the loan. With an initial fixed-rate period (usually for five, seven or 10 years) featuring a low introductory rate, ARMs can be an attractive option for those looking for and adjustment period (pardon the pun) with their mortgage payments.
This initial fixed-rate period is followed by a variable-rate period for the remainder of the loan. Though ARMs aren’t for everyone, they can be an excellent option for those who don’t plan on staying in their home for longer than five to 10 years.
If you do plan on staying in your home for longer than 10 years, there’s also always the opportunity to refinance when you’re getting close to the conclusion of your fixed-rate period. The risk with relying on refinancing is that you’ll be at the mercy of the market at that time. But if you keep an eye on current rates, you might be able to find an ideal time to refinance. Working with a good loan officer is key, too. Our loan officers will even reach out to you if they foresee an opportunity that could be beneficial for you.
Don’t forget about down payment assistance programs
Are you a first-time homebuyer? If so, there might be a down payment assistance program that could help give you a boost. Sound too good to be true? There are tons of options out there and you could end up being surprised by your eligibility. From state to federal programs to neighborhood- to occupation-specific options, both government agencies and private organizations have programs worth investigating.
A down payment can be a hurdle for many first-time buyers. There are instances where buyers are ultimately paying the same amount in rent as their monthly mortgage would cost, but just don’t have a large enough down payment to make buying a possibility. This is where a down payment assistance program proves to be invaluable—allowing buyers to start building equity sooner.
Consider community lending
These types of programs create alternatives for buyers who don’t necessarily meet the industry-standard, traditional mortgage qualifications. With more flexible guidelines, someone who might not have otherwise been approved for a mortgage could find the financing they need to become a homeowner through a community lending option.
We’re also seeing more of these programs not limiting requirements to income but looking at lending areas that may be underserved as a whole. It’s worth inquiring whether the neighborhood you’re looking to buy in would fall under this category. Your loan officer will be able to find that information out for you.
Turn your current home into your dream home
Maybe you’ve found yourself a fixer-upper, but you’re concerned with how you’re going to cover the costs of the much-needed repairs. Or maybe you’ve stretched your home budget to the limit (or know that you will once you make your move) after your down payment, closing costs and now new monthly mortgage payment, and you’re wondering how you’re going to fill your new rooms.
First of all, it’s fine to take your time with this. Don’t expect to have every room in your new home perfectly furnished right after you move in. If you’re going from a two-bedroom apartment to a three-bedroom home, it’s likely it’s not just the extra bedroom that you’re going to need to fill with new furniture. You might be looking at the addition (all at once) of a family room, dining room, living room, basement, back patio—all kinds of furniture-less new rooms.
A personal loan allows you to make some of these big-ticket purchases together with a set budget in the amount of your loan. You’ll know exactly how much your monthly payment will be, so you don’t have to worry about fluctuating bills. If you put these larger purchases on a credit card, but still need to use the card for other purchases before paying off your balance entirely, you’ll be unsure of what your bill will look like each month.
Personal loans also typically offer significantly lower interest rates than credit cards, as well as more time to pay off your purchase or project. While some credit cards offer balance transfers or a 0% APR for an introductory period, even the best of these promotional offers extend out for about only 15-21 months. Then once this introductory period is over the APR generally shoots up into the double digits, with some of the best-rated introductory offers adjusting to as high as a 27.99% variable APR. Personal loans offer a fixed rate for a specified number of years.
HELOC for home updates
If you’re already a homeowner and hoping to move because you’re looking for an upgraded kitchen, bathroom, extra bedroom—you name it—you might be able to use a HELOC (home equity line of credit) to make some of those updates to your current home without having to move.
A traditional HELOC is a revolving line of credit that turns your equity into money you can use for almost anything. Using your property as collateral, a HELOC sometimes comes in the form of a second mortgage (but not always). The amount you can borrow will depend on the amount of equity you’ve built up.
There are non-traditional HELOCs available as well. These function slightly differently, as the full amount is deposited into your bank account after loan approvals, so you aren’t paying as you go. These HELOC options are still a line of credit and typically offer the flexibility to draw more funds once you’ve started to pay back your initial deposit.
With a HELOC, you can use your home to improve your home—and bonus points if these improvements also boost its overall value. We have a great resource for gathering both estimates of potential projects as well as information regarding what your return on investment (ROI) might look like. Our article can help you decide when to stick with the basics and when to consider springing for a luxury version.
When it comes to getting into your dream home—or fixing up your current home to make it everything you’re looking for—there are so many options. A good loan officer will be able to help you clear some of the homebuying hurdles you’re facing. Make sure to speak with someone you trust to help you navigate all the options available to you.