Are You Waiting For Rate to Drop Before You Buy?

Are You Waiting For Rate to Drop Before You Buy?

You’re finally ready to buy a house and what happens? Rates go up! It stinks, and we don’t blame you for putting everything on hold. But here’s a better idea — move ahead and get a lower rate RIGHT NOW. 

How is that possible?

Embrace® just introduced a new buydown program, called Deflate the Rate, that lets you have a reduced rate for the first one to three years of your mortgage. 

With this buydown, you’ll enjoy:

  • Lower monthly mortgage payments for the first one to three years*
  • Save interest during the life of the buydown
  • Start building equity sooner

I know what you’re thinking — what’s the catch? Why are they offering this? No catch. It’s available now because rates have gotten so high that buying a home isn’t affordable for many of us. 

It may seem confusing but basically, it’s like paying points to get a lower rate, only you don’t pay. The seller or builder pays the upfront fee for you, and it’s put into an escrow account. Depending on the program you choose, you could lower your rate 3%, 2%, or 1% a year.

Right now, Embrace® is offering these buydowns:

  • 3-2-1: Reduces rate 3% in year one, 2% in year two, and 1% in year three
  • 2-1: Reduces rate 2% in year one and 1% in year two
  • 1-1: Reduces rate 1% for first two years
  • 1-1-1: Reduces rate 1% for first three years
  • 1-0: Reduces rate 1% for first year

Lets get a closer look!

Let’s look at an example of monthly payments where a buyer has a 2-1 buydown on a $400,000 loan with a note rate of 7%:

  • Year 1 =  5% rate = $2,147.29 
  • Year 2 =  6% rate = $2,398.20
  • Year 3-30 =  7% rate = $2,661.21

In this example, the buyer’s payments are $513.92 lower each month for the first year. They’re $263.11 lower each month the second year. And in total, they saved $9,324.36!

At the end of the buydown period, your mortgage goes back to the rate you originally started with. It doesn’t keep going up. 

And remember, rates fluctuate — and what goes up must come down. Eventually, when the rates drop, you can refinance your mortgage to an even lower rate. 

You get greater savings when the seller does a buydown versus a price reduction on the house, by the way.

So if you want lower payments for the first few years of your mortgage (and who wouldn’t!), you should consider a buydown.

There are no disadvantages to our program. It’s a great way to move into a home you love today. 

If you want to learn more, reach out to one of our loan officers. Don’t wait for a rate drop … it’s time to move!

The buydown amount depends on the amount contributed by the seller or builder. The borrower remains responsible for the full amount of the monthly payment if, for some unforeseen reason, the buydown funds are not forthcoming. 

*Assumptions. The monthly payment on a $300,000 30-year fixed-rate mortgage at an interest rate of 6% with an 80% loan-to-value (LTV) would be $1,799 with 2 points due at closing and an Annual Percentage Rate (APR) of 6.255%. Payment does not include taxes, insurance premiums, and certain other fees that will result in a higher monthly payment. Assumptions are based on current market rates and other factors. Mortgage insurance may be required for LTV >80%. If mortgage insurance is required, it will increase the APR and monthly payment. Terms are subject to change without notice and may not be available at the time of application. Loan amount and other restrictions may apply in certain areas. 
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