1. Adjustable Rate Mortgages (ARMs)
Adjustable-rate mortgages are fixed for a set period of time and then are adjusted based on the market. The shorter the fixed time period, typically the lower the rate. The average life of a loan is less than 10 years, so if you don’t want to take as much of a risk, consider looking into a 10/1 ARM.
2. Interest-only
There is more risk for this one, but we are seeing buyers taking advantage of Interest-Only loans because they know they will only have the loan for a short period of time or plan on refinancing out of it soon. This is a shorter-term option to keep your monthly payment lower, and confidence your home will appreciate in value.
3. Shorter-term Loans
10, 15, and 20-year loans typically have lower mortgage rates. If you can handle a higher payment, but want to keep your rate lower, consider a shorter-term loan.
4. Assumable Loans
There is a chance the seller of the home you’re purchasing has an assumable loan product. If they have one, and the rate is lower than what the current market is offering you, consider assuming the seller’s loan. You also want to make sure that the loan balance is sufficient enough for you as well because it’s hard it get a 2nd mortgage on top of the assumable loan to make up for any differences.
5. Larger down-payments
Make sure your loan advisor knows your situation inside and out. I’ve seen scenarios where if the Buyer were to put just a little bit more down, bringing them to a new threshold, the rate would go down. Ask your loan advisor how much you’d need to put down to get to the lower rate tier.
Bonus Tip
Or you may also consider buying the rate down. Doing so will increase your out-of-pocket costs. If you do explore this option, check how long your savings on the new rate would take to break even for the number of costs you’ll need to put in.
