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Home Financing

Five Tips to Make Home Buying Possible Today

By August 29th, 2023No Comments

We find ourselves in a very difficult time for potential home buyers today due to mortgage rates sitting at a 20 year high and home values at an all-time high. Add to that very tight inventory, and you might be tempted to sit on the sidelines for the next season. But what if you need a home or are tired of waiting on your dreams? These five tips will help make home buying more possible today.

Please note this is not intended as financial advice and is intended for educational or entertainment purposes. If you find interest rates entertaining, we should really talk.

#1 Buy down your rate

Did you know there is usually a cost to any given mortgage rate? When a mortgage loan officer quotes rates on a given day, we are looking at the par (or zero cost) rate as well as a whole menu of options to buy down to a lower rate. These costs are expressed as a percentage of the loan value and typically range from a sliver to 2 or 3%. Buying down 1 point is usually recommended to reduce the amount of interest that is part of your monthly payment and, in certain cases, allow for a higher purchase price.

The typical result of buying down a rate is a small charge up front that pays for itself within a year or two. Ask your mortgage loan officer to do the math for you to anticipate when you are likely to see the real savings kick in. Many mortgages originated within the past year will likely be refinanced within the next two years, so you only want to buy down if you’re likely to stay in the loan long enough to realize the overall savings.

#2 Increase your down payment

Money doesn’t grow on trees, but many have cash set aside for a rainy day or retirement and it can be advantageous to leverage that available cash when you need to lower your loan amount for a new purchase. A home is not thought of as a liquid asset, so having emergency funds on hand is still recommended, but it’s worth noting that the cash you put into your home is growing at the rate of increase of the value of your home.

Many first-time buyers bring gift funds from relatives to the table as well. Using these funds to get you over the finish line with closing costs or pushing your down payment over 20% to avoid mortgage insurance is a common strategy.

#3 Count on leverage

The beauty of investing in real estate is the idea that no matter how much your down payment is, you benefit from all of the appreciation in the value of the property. Whether you put 20% down or 3.5% down, if your home appreciates $100k in the next two years, you see all of that value for refinancing out of mortgage insurance or borrowing against for other financing endeavors.

This one reality tend to be the tipping point when you are asking whether you should buy now or wait until rates come down. If you’re gambling on home prices coming down, you better check local forecasts and historic trends. Even if you wait and rates do come down, you’re likely looking at paying a higher price for the same property. Put that appreciation in the win column for your own goals!

#4 Be opportunistic

The beauty of a slower (not slow, just slower) market is the ability to be opportunistic. When many are staying away from the market due to higher rates, that means you might have the upper hand when your ideal property comes on the market. Very low inventory still remains a challenge, but a pre-approved buyer is better situated to pounce on a property than one just browsing Zillow without a plan.

Less desirable properties are also staying on the market longer than usual due to a lower number of investors in the market. The days of the sure-thing flip have been frustrated by higher borrowing costs, cutting into tight profit margins for many developers and contractors. As they sit on the sidelines, you might have a chance that would have been snapped up a couple years ago.

#5 Plan on renovations

That brings us to our last point. Those less desirable properties usually come with some needed work. Finding a good contractor has become difficult in the past years as well, but if you’re able to put some sweat equity into your new home, you will find many more opportunities. Many of the homes coming to market in this high rate environment are from relocations and older boomers downsizing. Many of those homes will come as-is and need an optimistic outlook and a strong back to become your dream home, but won’t be snapped up by the competition quite as fast these days.


Let me know if these strategies or others have worked well for you. Have more questions? Don’t hesitate to contact me!

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Scott Bothel
NMLS #2316919