5 Ways Austin Homebuyers Can Succeed Despite Higher Mortgage Rates

As homebuyers make plans for 2023, they may wonder how to get a great deal on an Austin home in the current housing market.

Mortgages rates are significantly higher at the start of 2023 compared to the beginning of 2022. While higher rates are a headwind for many homebuyers, the good news is that competition among buyers for listings has calmed, and home prices are leveling off in Austin. This shift in the market will create new opportunities for aspiring homeowners. To help prepare buyers to win in this market, the team at Prevu Real Estate put together some tips on how prospective buyers can succeed despite higher mortgage rates.

Buy down your rate with mortgage points

One of the best ways to secure a lower mortgage payment is to buy down the rate with mortgage points. Essentially, each mortgage point bought at closing is equal to about 1% of the total loan amount and typically lowers the interest rate on the mortgage by 0.25%. 

For example, if a home in Mueller is financed with a 30-year fixed-rate loan of $650,000 with a mortgage rate of 6.5%, paying for one point would cost the buyer approximately $6,500 at closing and lower the interest rate to 6.25%. In this $650,000 mortgage example, the 0.25% difference in rate could potentially save $38,621 of interest over the 30-year term, assuming no prepayments.

The added upfront cost may be worth reducing the interest rate, especially if the buyer is planning to own the home for the full term of the mortgage. 

Consider an adjustable rate mortgage 

If a buyer only plans to live in a riverfront condo for a few years before upgrading, an adjustable rate mortgage (ARM) might work best. 

ARMs are loan vehicles that have fixed interest rates for the first few years and adjustable rates for each following year, depending on market trends and conditions. Generally, ARMs have a lower interest rate than a 15-year or 30-year fixed-rate mortgages. But once you the loan transitions from the fixed period into the adjustable period, the monthly interest rate can vary. 

These types of loans can offer interest savings in the early years of homeownership and can be an attractive choice to achieve a lower monthly payment if plans are to only own a home for a short period of time.

Get a commission rebate

Higher mortgage rates year-over-year are heavily influencing the current real estate market in Austin but a little-known concept called a commission rebate can help put money back in the home buyer’s pocket in any market. 

Sometimes called a buyer rebate, this money-saving tool helps make the home purchase more affordable. Not all real estate professionals offer this option to buyers, so it is important to meet with as many agents as possible and ask if they can provide a commission rebate.  

The practice is legal in Texas and 39 other states, allowing brokers to provide a portion of their broker commission back to homeowners. Prevu Real Estate offers Austin buyers the largest commission rebate in the state, totaling up to 2% of a home’s purchase price. 

These funds can help buyers furnish their new place, reduce planned renovations, or simply replenish the savings after closing.

Make a larger down payment

When buying a home, paying as much upfront as possible can pay off down the line. 

Down payments typically total around 20% of the home’s purchase price. The rest of the purchase price is paid off in monthly installments with mortgage financing. When a home buyer cam increase the amount of the down payment, it reduces the borrowed amount, resulting in a smaller monthly payment.

Lenders appreciate when buyers put more money down, and may even be willing to lower the interest rate offered if the down payment is a high enough percentage of the home’s value. 

Set up property alerts 

Speed is essential when searching for homes in Austin. Luckily, online tools can enhance the search, and properties are seen as soon as they hit the market.

Prevu offers a digital home buying platform that streamlines searches based on preferred neighborhood and property criteria. So when that dream home gets listed, the home buyer gets alerted. From there, with the click of a button, a home tour can easily be scheduled.

Being able to see homes quickly allows home buyers to be more competitive and to make an offer before other buyers, which is especially helpful if a home is attractively priced.

Interested in buying a home in Austin? Browse listings and see how much can be saved with Prevu’s Smart Buyer Rebate.