Buyers are turning to mortgage points to lower their mortgage interest rates. (iStock)
Mortgage points, which are one-time fees paid at closing in exchange for a lower interest rate, are becoming more prevalent as buyers look for any way to lower their rates.
The number of homebuyers who paid discounts nearly doubled from 2021 to 2023, the Consumer Financial Protection Bureau (CFPB) found in a recent report. The increase was even higher for borrowers with lower credit scores.
"Higher interest rates on mortgages have led borrowers to pay upfront fees to lower their interest payments," CFPB Director Rohit Chopra said.
"The heavy use of 'discount points' suggests that many borrowers are uncertain about their ability to refinance in the future."
Federal Housing Administration (FHA) borrowers were among those who used discount points most. About 77% of FHA borrowers with credit scores below 640 purchased discount points, while 65% of all FHA borrowers paid discount points, the report found.
If you’re looking to purchase a home in today’s market, you can explore your mortgage options by visiting Credible to compare rates and lenders and get a mortgage preapproval letter in minutes.
NEW CONSTRUCTION REMAINS POPULAR AS EXISTING HOME LISTINGS CONTINUE TO LAG
Sellers have been waiting to sell for years; now the time has come
Sellers that have been holding onto their homes due to the "rate lock" effect may finally be ready to sell this year.
Homeowners looking to sell in 2024 have been thinking of selling for an average of two years, a Realtor.com survey revealed. About 85% of homeowners have been considering selling between one to three years.
"Plenty of homeowners have been eagerly waiting for mortgage rates to come down so that they can sell their current home and more affordably upgrade to a new one," Realtor.com Chief Economist Danielle Hale said.
"With mortgage rates expected to ease slowly throughout the year, some potential sellers are planning to get off the sidelines in 2024 and make a move, with the majority expecting to buy a new home at the same time that they sell their current one."
Many sellers now realize that listing sooner may have meant higher interest rates on a new home but would have meant more money. About 79% of those surveyed in Realtor.com’s report felt that if they listed sooner, they could have taken advantage of a hotter housing market.
If you think you’re ready to shop around for a home loan, consider using Credible to help you quickly and easily compare interest rates from multiple lenders.
HOMES LISTED IN JUNE OFTEN SELL FOR MORE THAN USUAL, A ZILLOW STUDY REVEALS
Millennials are the largest group of homebuyers
Millennials have surpassed baby boomers to become the largest group of homebuyers, a National Association of Realtors report said.
Nearly 38% of Millennials are homeowners now, up from 28% in 2023. The largest group of home sellers are baby boomers, at 45%.
"The generational tug-of-war between Millennials and baby boomers continued this year, with Millennials rebounding to capture the largest share of home buyers," Dr. Jessica Lautz, NAR deputy chief economist and vice president of research, said.
"This notable rise is attributed to both younger Millennials stepping into homeownership for the first time and older Millennials transitioning to larger homes that suit their evolving needs."
The proportion of Millennial first-time buyers increased from 70% to 75% within the last year. An additional 44% of older Millennials were also first-time buyers this past year.
Gen Z is getting in on the market, too, but not as much as the older generations. Gen Zers ages 18 to 24 only accounted for 3% of all buyers.
Of the Gen Zers that did buy homes, 31% of them were single women — much higher than in any other generation.
"Gen Z buyers are entering the housing market, and their demographics are emerging distinctly from other age groups. More than half are single buyers, outpacing all age groups of single men and single women, and they are also most likely to identify as LGBTQ+," Lautz said.
To see if you qualify for a mortgage based on your current credit score and salary, consider visiting Credible, where you can compare multiple mortgage lenders at once.
HIGH HOMEOWNERS INSURANCE RATES SCARING AWAY FLORIDA HOMEBUYERS, OTHER STATES FACE THE SAME ISSUE
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