Interest rates have remained stubbornly high since they started ticking up in 2021. 

For buyers, this means the cost of borrowing money increases, making it harder to afford homes. This has a ripple effect on sellers: because borrowing costs are high, potential buyers may be discouraged from purchasing homes, leading to lower demand and, ultimately, pushing buyers to lower their prices to attract buyers.

You might be thinking, "Johnny, I don't need to worry. Interest rates will drop in 2025." However, a recent study shows that when you look at predictions from Fannie Mae, the Mortgage Bankers Association, and Wells Fargo, rates are only expected to fall to about 6.33%. That’s not a big drop from the current rate of around 6.7% to 6.8%. 

So, how do you secure lower interest rates, possibly as low as 4%? There are two ways to do that.

Option 1: Find an assumable mortgage. Many people purchased homes when interest rates were in the twos, threes, and fours, and their mortgages can be assumed. You can have your agent look for homes in your desired communities and identify those with low interest rates. Then, you can approach the homeowners and propose to take over their mortgage.

The advantage of this is that you can secure a lower interest rate. However, the downside is that you might need to pay extra because if they bought the house a few years ago and its value has increased by $100,000 or $150,000, they’ll likely want to capture that gain. So, you might have to put a bit more money down, but the benefit of a lower interest rate can be worth it.

Option 2: Use a 2-1 or 3-2-1 buydown. Let’s say you don’t have a lot of extra cash, like $150,000, for a down payment. Can you still secure a mortgage rate in the fours? Yes, you can, and it's called a 2-1 buydown. Here’s how it works: if you're buying the home, the seller will cover your interest payments for up to two years.

"Secure a mortgage rate in the fours and regain your buying power."

In the first year, they’ll pay enough to lower your rate into the fours, and in the second year, it will rise into the fives. Hopefully, by the end of those two years, you'll be able to refinance when interest rates drop to a more favorable level. There’s also a 3-2-1 option available. 

If interest rates are in the sixes, you can secure a rate in the threes. For this to work, sellers need to cover the interest, so it's important to consult your mortgage professional. Make sure you qualify for this option, and ensure your agent is experienced in negotiating these kinds of deals.

If you're selling a house, these strategies can entice buyers to choose your home over the competition. If you have any questions, reach out at (855) 935-6673 or send an email to [email protected]. We’ll help you with this process.