You may have noticed that mortgage rates are on the rise. We have seen rates increase from three percent to four percent, earlier this year, up to nearly eight percent now. Rising inflation is mostly responsible for this. The Federal Reserve, which is responsible for setting the interest rates that directly affect the mortgage rates, has been very clear on their stance with the housing market. Jerome Powell, who is The Federal Reserve Chair, has said the Federal Reserve is trying to "reset" the housing market after prices skyrocketed up to all-time highs in 2022. United States Home prices increased nearly 40 percent in only two years.

            We are now in a totally different housing market. The market has softened, and the market is more buyer friendly. The only problem is that mortgage rates are the highest they have been in nearly fifteen years. What can buyers do to combat this high cost of borrowing?

            You can "buy down" your interest rate as a borrower. A buydown is a way for a borrower to obtain a lower interest rate by paying discount points at closing. A lower interest rate will make your monthly payment lower. A general rule of thumb on buydowns, is that it costs about 1% of your loan amount. So, if you are borrowing $200,000, buying one point down will cost you about $2,000. If you have extra cash on hand, this can be a good idea. If you are light on cash, you probably want to stick to the interest rate your lender gives you.        

            Another big change in the real estate market has been seller and builder payed closing costs. After sellers did not pay any closing costs for buyers during the big boom of the real estate market, we are seeing sellers pay thousands in buyer closing costs. I had a closing last month where a builder and lender provided $17,000 in closing costs for my buyers. $17,000 covered nearly all the lender closing costs for the buyers. That was a significant reason my buyers chose this home and neighborhood. This is a great way for a buyer to save money up front in this market. If you are looking for home, make sure you or your Realtor try to negotiate closing costs to save you money upfront in a home purchase.