Mortgage rates have surged to 20-year highs, and are poised to rise even further.
Mortgage rates have surged to 20-year highs of more than 7%, and are poised to rise even further. But buyers of new homes aren’t necessarily feeling the pinch.
That’s because “most large home builders are allocating 4%-6% of the home-sale proceeds toward buying down the mortgage rate, permanently, for their buyers,” Burns said. “Giving back 4%-6% of the price to keep sales strong is the smart thing for them to do,” Burns added. Buydowns can be permanent or temporary. Mortgage products like the 3-2-1 temporary rate buydown, for example, offer lower rates in the first few years of repayment, after which they permanently reset to the higher market rate.
Generally, these rate buydowns are paid for by the home buyer, where they set aside part of their down payment, or the home seller or homebuilder can offer it as a negotiating tactic.With the 30-year hovering around 7.25%, a homeowner who has a budget of $3,000 per month to spend on housing can only afford a $429,000 home today, Redfin said. If they had bought last year around the same time period, their rate would have been around 5.
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