We’ve all heard the stories of people who bid on homes during the hot housing market of recent years and who lost their bids to cash buyers offering more than the home’s asking price.
But human resources manager Stephen Jackson told the Los Angeles Times that he’d been recently been successful in buying a condominium for $20,000 under its asking price: and he wasn’t outbid by a cash buyer.
Better News For Buyers
Rising mortgage interest rates seem to have leveled off and declined from their 2022 peak. This means that people are likely to be able to afford a wider range of homes and be more flexible in their home search.
In addition, the Los Angeles Times reports that while many sellers weren’t willing to make any concessions during the extremely hot L.A. housing market in recent years, they are more willing to cover closing costs or pay for repairs.
Seller-Paid Mortgage Rate Buydowns
Another benefit that some sellers are offering? Mortgage rate buydowns. Some sellers are willing to pay a portion of closing costs that pay for mortgage discount points. The amount of rate reduction varies depending on the lender.
Paying upfront points to reduce ultimate amounts paid over a 30-year mortgage can result in some large savings later on. For example, on a 30-year, $400,000 mortgage at 6.5% interest, paying four points to reduce the interest rate would cost $16,000. The pre-paid buydown would reduce the mortgage interest rate from 6.5% to 5.5%, lowering the monthly principal and interest payment from $2,528 to $2,271.
The total savings from this could amount to over $90,000 over the life of the loan.
There are other factors to consider, of course. For example, some loan programs limit how much sellers can contribute to closing costs. You also may not be planning to stay in your home for 30 years, which changes the potential benefit of a mortgage rate buydown.
This is why it’s important to work with a mortgage loan broker that can help you to navigate the complex home-buying and mortgage landscape in Los Angeles. California Platinum Loans can help you find the property that is right for you as well as the right mortgage.
Khouri, Andrew. “Some buyers find deals in shifting Southern California housing market,” Los Angeles Times, 19 February 2023, url: https://www.latimes.com/california/story/2023-02-19/seeking-a-deal-some-home-buyers-return-to-the-southern-california-housing-market
Giovanetti, Erika. “A Guide to Seller-Paid Mortgage Rebates,” U.S. News & World Report, 20 January 2023, url: https://money.usnews.com/loans/mortgages/articles/a-guide-to-seller-paid-mortgage-rate-buydowns