For a home worth $250,000 with a 20% down payment, this would result in a monthly mortgage payment of over $1,600.
Mortgage rates are on the rise, with Freddie Mac reporting an interest rate of 6.39% for a 30-year fixed-rate mortgage loan in the week ending May 4, 2023
However, there are still options available for those who want to buy a home despite these high rates. One option is to use a mortgage rate buy-down, where you pay upfront for a lower interest rate later. Some lenders offer a 2/1 buy-down, where the initial year has an interest rate of 2% lower than the current rate, and the second year is 1% lower. This requires an upfront payment to the lender and the interest rate returns to current levels in the third year.
Another option is to use a bridge loan, which is a type of short-term financing. This is ideal for those who want to buy a home but cannot wait until they sell their current property. A bridge loan allows you to buy a home now and pay it off later with the proceeds from selling your current home.
First-time homebuyers may also qualify for a down payment assistance program, which provides funds to help cover the down payment requirement of a lender
Some of these programs are grants that you do not have to pay back, while others offer closing cost credits or interest rate reductions. HUD-approved housing counseling services or state housing finance agencies can provide information on available housing programs.
FHA, USDA, or VA loans are also available, which offer lower interest rates and lower down payment requirements. It is essential to compare different programs and work with your lender to find the most competitive rates. With these options available, potential homeowners can still afford to purchase a home despite the increasing mortgage rates.