If you or anyone you know is buying a house this summer, chances are you’ll be dealing with competing offers and low inventory issues. Here are three ways to avoid getting priced out of the house you want:
1 – Consider Your Overall Debt Strategy For example, what would it look like if you used some of your down payment funds to pay off other debts instead of using those funds for a down payment? This may open the door to getting you qualified for a larger mortgage so you can bid higher on the house. Plus, home loans often carry a lower after-tax interest cost than other debts that may not be tax deductible. Please see a CPA for details on the tax deductibility of mortgage debt in your situation.
2 – Consider an Adjustable Rate Mortgage (ARM) Depending on bond market conditions, the interest rate (and monthly payment) on an adjustable rate mortgage can often be lower than a fixed rate mortgage. If this is the case in your situation, you may be able to use an ARM to comfortably afford the home. Keep in mind that many ARMs have interest rates and payments that are fixed for a period of 5 years or 7 years. This means the only risk to you is that you keep the house for longer than the initial fixed period AND interest rates go up considerably after that timeframe.
3 – Consider the Use of Gift Funds Gifts from friends and relatives can often be used for a down payment. Gift funds could be very useful if you find yourself in a bidding war where you’ve maxed out your mortgage options and the only other option is to come to closing with more cash.
Contact me for further details and to explore your mortgage options!