Cora Carleson.........................4

Hey Cora, I know you get this question all the time, but what are rates doing right now? Signed Wanting to Buy.

Dear Wanting: Do you remember in January and February when I told you that you needed to buy something because rates were going to increase? Well, here we are! Yes, interest rates on home mortgages have increased. And this increase has literally put some buyers out of the market! On a $350,000 home, an increase of just 1% can cause your payment to increase by $225 per month! That’s no small Tootsie-Roll! This means that if you qualified for a home at $350,000 at a 5.5% interest rate, at 6.5%, you only qualify for $314,000. A $36,000 difference! That’s hard to swallow isn’t it!

But do not fret, there are some options out there. Here are a couple interesting possibilities for you: 2:1 Buy down Okay, this is interesting. This program allows the SELLER to help the buyer with 2 years (yes, I said 2 years) of their mortgage payments by pre-paying a portion of interest for 2 years. Here’s how it works. Let’s say that Bob and Betty Buyer want that home for $350,000. They need that home because they already have 3 kids and twins on the way. So, before the twins are born, Bob and Betty want to be settled into a new home. When they find the home they want, they negotiate with the seller (through their trusted Realtor of course) that they would participate in a 2:1 Buydown. If the interest rate is currently 6.5%, the seller would pay the difference to “buydown” that first year rate by 2 percentage points, making the first year’s payments 4.5%. Year two, that rate would be bought down by 1 percentage point bringing it to 5.5%. At the beginning of year three, month 25, the rate would go to its full rate of 6.5%. Now this leaves the seller with quite a large contribution on behalf of the buyer and most of these are happening with new construction. How big you say? In this scenario with Bob and Betty Buyer and family, the seller would have to contribute $11,070 to buydown this rate for two years.

Now, how could this really help the buyer you ask? Well, it allows Bob and Betty to be able to qualify for more house now, when they need it. Unlike an adjustable-rate mortgage, it also locks the rate to go no higher than 6.5%. Perhaps Bob and Betty are only going to be

here for 2 years. This would help them a great deal. Ultimately, Bob and Betty are hoping that rates will drop during those 2 years, and they can refinance at a lower rate. ARMS – now don’t get scared, not all ARMS are bad. Look at gramma’s arms! They are always there to give you a great big hug! But Mortgage ARM’s are a little different. An ARM (adjustable-rate mortgage) is a loan typically offered with a 30 year or a 15 year term. A 5/1 ARM has a fixed rate for the first 5 years of the loan. The rate then becomes “variable” and adjusts every year for the remaining life of the loan term. So yes, that does sound much scarier than Gramma’s arms! Who knows what that rate would be at the end of the 5 years. My suggestion, if you find that an ARM works for you, refinance it before the end of the 5 years once the rate drops a bit. Although, even that still has its risks as the rate may not drop. You will either want to sell that home in 5 years or less, or refinance at a permanent rate. Right now, today, that rate is about 5% but this can go up or down depending on the day AND your credit score. You Experience could also do a 10 year ARM, around 5.25%. If you think that you

Matters! are going to live in your home for 7 years, a 10 year ARM may be right for you, because you can sell the home before it changes to a variable rate. Keep in mind what we talked about last month (assumable mortgages). An ARM will not be attractive for someone to assume. So, if you want to have an assumable loan, you would not use an ARM. We will see more and more innovative ways to get a mortgage loan and ways to keep the payments down for the next few years. When you decide to buy something, please call me and we can discuss all the different lending options that are out there for you. Some you may not even have heard of! Some are going to be better than others, and some may not be right for everyone, but perfect for you and your unique needs. Keep in mind, I am always out there looking for a good deal for you. You may get a random call from me saying “hey, you need to look at this house, it’s perfect for you, and a really great investment.” I’ll be straight with you! We will begin to see some creative ways to get interest rates down, and that’s always good for you! Don’t be shy, let’s find the right house for you today!

Call Cora Today!

Keller Williams Realty Alaska Group Of Wasilla 621 S Knik-Goose Bay Rd Wasilla, AK 99654

www.clcandassoc.com 907.982.5700