Sellers chipping in

Plus, leopard print and pink marble

͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌  November 19, 2022 | Issue #69

Good morning! This week we’re talking about mortgage rate buydowns, how much you really need to earn to afford a home and Ivana Trump’s townhouse.   Chipping in Kiersten Essenpreis for Money Want to buy a house but don’t want to pay today’s sky-high mortgage rates? Ask the seller to chip in.  More and more sellers are agreeing to something called a “rate buydown.” The mechanics of this strategy vary, but the general idea is that the seller pays a portion of the buyer’s mortgage interest upfront. Buydowns can be permanent (lasting for the life of the loan) or temporary (reducing the rate for two years or so). Builders, lenders and even real estate agents can chip in too. It’s most common with new-construction homes, but the seller-funded version is gaining traction right now. Why on earth would a seller do such a thing? Well, it’s getting harder to find buyers these days. So buydowns are one way to sweeten the deal and get a home sold.  Plus, it’s often less expensive than accepting a lower price. Take this example from an Aly J. Yale’s recent story on the trend —  A seller in Portland, Oregon, agreed to a $15,000 buydown on a $590,000 sale. The buydown slashed the buyer’s mortgage rate from 5.75% to 4.75% and her monthly payment by $341. To achieve the same savings with a price cut she would have had to offer $30,000 less for the home.  As Trudy Kelly, a senior loan officer at Churchill Mortgage in Portland, asked Aly: “What’s more important — what you pay for the home or what your monthly payment actually is?” The answer will depend on the buyer’s (and the seller’s) financial situation. Another key question is whether a buyer wants to reduce their rate a little bit for a long time, or a lot for the first few years after buying. “Home affordability concerns are at the forefront of many buyers’ minds in the current environment,” said Peter Idziak, a real estate attorney, in a Washington Post story about buydowns. He told writer Michele Lerner: “The first few years of homeownership are often the most expensive, especially for first-time buyers. Furnishing a home and completing renovations or upgrades are often major expenses for buyers. A temporary buydown provided by the seller allows the borrower to have more money available during these years to handle such costs.”  For more: Homebuyers and Sellers Alike Are Loving This Popular Trick to Lower Mortgage Rates   Six figures Money; Getty Images A popular rule of thumb says you should spend no more than 30% of your income on housing. We can debate the pros and cons of this rule some other time, but there is no way around the fact that it’s getting a lot harder for homebuyers to reach that target. Some numbers — $2,682 = the monthly mortgage payment for a typical home bought last month, as calculated by brokerage Redfin. $107,281 = how much homeowners paying that much need to earn to keep their monthly mortgage costs in-line — a jump of more than 45% from last year. Last but not least — $70,784 = the median household income in 2021, according to the Census Bureau. It doesn’t take a math degree to see the problem here. Typical incomes are not large enough to cover typical housing costs right now. The cause, of course, is a vicious combination of high mortgage rates and still-rising home prices. Until one (or both) of those things come down for good, the problem remains. For more: You Now Need to Earn Six Figures to Afford the Typical Home in the U.S.   Leopard print and pink marble Evan Joseph Photography Ivana Trump’s Manhattan townhouse is for sale. The late socialite and ex-wife of former President Donald Trump, bought the 8,700-square-foot-property in 1992, following the couple’s divorce. Before she moved in it was a dentist’s office.  The Wall Street Journal got a look inside and described the experience this way: “Stepping into Ivana Trump‘s Manhattan townhouse, with its limestone facade and embellished gold entryway, is like stepping back in time to the 1980s, when the late socialite and her ex-husband, former President Donald Trump, were the ultimate power couple. The home’s décor—leopard print, pink marble, crystal chandeliers and lots and lots of gold—is reflective of the glamorous, over-the-top aesthetic that helped define that era and the Trump real-estate portfolio.”  Asking price: $26.5 million   BTW As predicted, mortgage rates dropped last week. Freddie Mac pegs current mortgage rates at 6.61% — still higher than a year ago, but an improvement from 7% plus. Relatedly, The New York Times has a good explanation of how mortgage rates are set. 7 Common Home Buying Mistakes and How to Avoid Them I’ll be taking next weekend off for Thanksgiving. Money Moves will be back in your inbox on Saturday, Dec. 3.   Happy hunting, P.S. Share your real estate questions with me on Twitter @samsharf or via email at sam.sharf@money.com. P.P.S. Have a friend who loves real estate or is looking for a home of their own? Please forward them this email or send them to the Money Moves subscription page.   Money’s Essential Home Buying Resources: Fall 2022 On the hunt? Check out Money’s Mortgage Calculator, list of The Best Mortgage Lenders and look at the latest mortgage rates. Thinking of refinancing? Our list of The Best Mortgage Refinance Companies can help. You can also use our Mortgage Refinance Calculator or these refi tips. Key question: How much house can I afford?   This newsletter is free because Money earns a commission when you click or make purchases from the links in this email and on our site. We also receive compensation for some of the products and services featured in this message. Offers may be subject to change without notice. Learn more about how we make money. Privacy Policy • Advertise With Us • We're Hiring! To stop receiving these emails, unsubscribe or manage your email preferences. Copyright ©2022 Money Group, LLC. All rights reserved. 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