Market Myths #1 - Interest Rates are sky high and there's nothing that can be done.

Real estate is always in the news, especially after the recent extraordinary period of rapid price rises and a hyper competitive market. So it's no surprise that I'm often asked by friends and clients to share my thoughts on the market of the moment. With that in mind, I thought why not take on the top "market myths" floating out there these days.

And so here we go - the first in my series of?Monday Market Myths?emails, this one concerning the ever popular topic of interest rates. And it's a two part myth no less! I hope you find it interesting and would love to hear your feedback.

Myth #1a - Mortgage rates are sky high

Fact - Rates are higher but historically not unusual?

Rates are certainly higher than the they were last year. But those were record shattering lows and had to climb at some point. That said, rates are probably not as high as you may think. Since the media tend to report only rate jumps (they make for good headlines), not everyone knows rates have retreated from those headline highs of earlier this year.?

As of last week, rates for a 30 year fixed conforming loan ($725K or less) were right around 6% and jumbo loans even lower at just over 5.6%.??It's worth noting that the average interest rate over the past 30 years was roughly 6%. So in some ways, we are basically back to normal.?

Myth #1b - There's nothing borrowers can do to lower their rate?

Fact - There are several ways buyers can reduce their interest rate.

One option to consider is?using an?Adjustable Rate Mortgage (ARM).?ARMs got a very bad rap during the financial crisis when they were unfortunately used incorrectly to allow buyers to buy a home that was more than they could afford, thanks to the initial lower rate. But homeowners got in trouble when they couldn’t refinance before the rate adjusted and couldn't handle the higher rate.

But ARMs can make sense if a buyer is not going to stay in the home long term or is confident they can refinance into a fixed rate loan to take advantage of lower rates in the future before the 5, 7, or 10 year period expires. Most first time buyers do not stay in that first home for more than 10 years so ARMs can at least be worth considering.

Another rate lowering strategy is a?Rate Buy Down. For decades borrowers could lower their mortgage rate by paying “points” at closing, i.e. money up front in return for lower rates. This can make sense especially if you are buying for the long term.?

A new spin on this idea is the?1, 2, or 3 year buy down?where money up front temporarily reduces your loan rate. This approach can make sense as a way to keep your initial payments lower and if rates come down, you can then refinance into a lower rate loan.

In either case it may be possible to negotiate a seller concession to help cover the up front costs of points or a short term buy down, especially if the home you are negotiating has been on market for a while.

Last but not least think of it as?marrying the house but dating the rate!?That’s a cute way of saying if you find your ideal home and can afford it with today’s rates, don’t let those rates stop you. Rates rise and fall and unless your financial picture darkens, you can refinance at a later date to take advantage of a rate drop and lock in a new lower rate.

The content of this email is my own take on the overall market. Rates of course are subject to change and each person's situation is unique so please don't hesitate to reach out to discuss your particular circumstances. I'm always here to help and can connect you to a local mortgage professional as needed to help map out the right financing strategy for you.

Be sure to stay tuned for next week's email on everyone's favorite perennial myth,?The Market is Crashing (for sure this time)!?

Ken