Creative Ways Homebuyers Are Paying Lower Mortgage Rates in 2024
Written by
Chris Adam
Edited by
Daria Uhlig
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If you’re in the market for a new house, you may be wondering how you’re going to afford the mortgage. After all, mortgage rates are near 7%.
That’s why some homebuyers are getting creative to pay lower mortgage rates.
Consider an Assumable Mortgage
One way you may be able to pay a lower rate is to get a home with an assumable mortgage. That’s where the buyers take over the existing mortgage that the seller already has in place instead of going out and getting their own loan. With this route, you might be able to find a mortgage with a much lower rate than the current one.
Many loans backed by the Federal Housing Administration, Department of Veterans Affairs and Department of Agriculture are eligible for assumption. However, most conventional loans, the most common type by far, are not. That’s because of a “due on sale” clause requiring the seller to pay the loan in full when they sell the property.
Know the Risks
Keep in mind, the borrower needs to cover all the equity already built up in the house. For example, if you buy a $350,000 home and assume the seller’s mortgage with a balance of $200,000, you must pay the remaining $150,000 in cash or additional loans. That means an assumable mortgage may not be the best bet if the current owner has paid off a large stake of the house already, as NBC News reported.
In addition, there are disadvantages and risks associated with assumable mortgages. You might not be approved for the loan, for one. And you’ll need to stick to the original terms of the loan, which means no opportunity to negotiate.
Check Out Other Options
If an assumable mortgage isn’t right for you, there are other ways to qualify for a lower mortgage rate. Paying more money down, increasing your credit score and taking out a shorter-term loan — 15 or 20 years instead of 30 — all can help you get a better mortgage rate.
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