Mortgage rates can move fast, slow, and sometimes somewhere in between. Federal Reserve decisions and economic trends can create uncertainty for homebuyers, even though mortgage rates don’t always move directly with the Federal Reserve’s rate.
Builder financing incentives offers another way to make homeownership more affordable. Some builders, including DRC, make home ownership more obtainable for all by helping new home buyers with interest rate buy-downs which lower monthly payments. These interest rate buy-downs can effectively lower your payments by hundreds of dollars. Not only making the payments more affordable for you, but also making the loan more attractive to the bank lending the purchase money. Lower payments equal lower risk for the bank. So in turn, the bank is more forgiving of debt ratios, credit scores, and even down-payments for some loan programs.
At Direct Residential Communities (DRC), we want new home buyers to understand their options and feel comfortable when making the leap from renting to home ownership.
We are here to build relationships with our buyers. As such, we want to provide as many options as possible to you for putting your trust in us to build your new home.
How Does DRC Offer Below Market Rates?
DRC offers below market rates by partnering with preferred lenders and putting funds toward lowering a buyer’s mortgage interest rate. The reason for the “Preferred Lender” status is straight forward; volume. DRC commits to bringing more opportunities to their lender partners, and to providing a fair market price with consistent quality in the homes we build. This doesn’t mean you have to use one of these lending partners, but when you do, the benefits are:
- The lender already has a working relationship with DRC and has assessed the build quality and consistency to be one they’re willing to trust as collateral for a mortgage. This ensures accurate appraisals, and trust that a home owner won’t have problems making payments due to poor craftsmanship creating a repair burden on the new home owner.
- The lender, when assessing your ability to repay the loan, has rate buydowns and prepaid interest agreements from DRC that they can use to make your payments lower, which in turn makes your ability to qualify for a mortgage under FHA, Conventional, or VA guidelines easier. Less underwriting headaches from high payments or bad debt-to-income ratio issues.
DRC most often has incentives in two forms:
- Temporary rate buydowns: Lower your interest rate for an introductory period, after which your payment increases to the scheduled loan payment. This is often meant to ease the transition from renting to homeownership, saving the new home owner on a couple years of payments. This savings can then be used to pay down other debt, decorate, or purchase furnishings for their new home.
- Permanent rate buydowns: Reduce your interest rate for the life of the mortgage, subject to the loan terms. The benefits here are obvious with-life-of-loan lower payments. This is most often used to help a new home owner qualify for a loan they are on the cusp of approval for, or for helping slide underneath a budget number the buyer has in mind.
Offers vary by loan type, eligibility, market, and home being purchased. Sometimes, there are even unadvertised options available. It’s always a great idea to reach out to the agent for the community you’re interested in and ask them what mortgage incentives are available.
For New Home Builders, Does Standing Inventory Matter?
Available homes can create opportunities for buyers. Builders may offer special financing or other incentives on select homes, including completed or quick-move-in properties.
If you’re ok with picking a mostly complete or already completed home, exploring current inventory and asking about available promotions can help you save on your new home purchase.
Here’s a link to the Atlanta, GA available home inventory and the Dallas, TX available homes.
What About the Price Difference?
Interest rate incentives are just one part of the homebuying picture. Depending on your goals, a builder-paid rate buydown may help lower your monthly payment, increase your purchasing power, or make it easier to find a home that fits comfortably within your budget.
As you compare your options, it can be helpful to look at the complete picture, including:
- Purchase price: The overall price of the home (and what incentives apply here too!)
- Monthly payment: Your estimated principal, interest, taxes, insurance, and HOA fees (yes, incentives can even affect these)
- Upfront costs: The amount you may need at closing (where incentives can really shine!)
- Financing options: Available rate buydowns and loan programs that may help make your new home more affordable
Your lender, or our preferred lenders, can help you compare different financing scenarios and show you how each option may affect both your upfront costs and monthly payment. Don’t hesitate to ask questions along the way. Understanding your options can help you choose the approach that works best for you.
The Bottom Line
Mortgage rates are always changing, but you don’t have to wait for the market to be perfect before finding your new home. No-cash-out refinances and other options are available so you don’t miss out on later market shifts. The investment in a home you own will likely remain steady for decades, though.
Ready to explore? Browse available homes and communities from Direct Residential Communities and ask about current financing incentives that may help make your next home even more affordable.
We are excited to get the ball rolling on an exciting new time in your life!
Financing incentives and promotional offers are subject to change, eligibility requirements, and other terms. Offers may apply only to select homes and require a participating lender. Contact Direct Residential Communities for current details.
