3 Couples Share How They Secured Mortgages with Rates Under 3%

Mortgage rates across the United States have been on a rollercoaster ride in recent years, creating challenges for buyers and sellers alike. Back in 2021, rates dipped as low as 2.1% as the Federal Reserve took measures to boost the economy during the pandemic. However, a surge in inflation prompted the Fed to raise rates consistently, culminating in a peak of 7.79% in October 2023, as recorded by the Federal Reserve Bank of St. Louis.

Despite the high rates, many homebuyers have found a way to secure lower mortgage rates through a lesser-known option: assumable mortgages. This type of loan allows qualifying buyers to take over a seller’s existing mortgage, including its interest rate, principal balance, and terms. It can lead to significant savings on monthly payments and total loan costs. However, not all loans are assumable; those backed by the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA) qualify.

Some relief has been observed in 2024, with mortgage rates hitting around 6.7% in January and continuing to trend downward. By mid-September, Freddie Mac reported the 30-year fixed-rate mortgage had dropped to 6.2%, the lowest level since February 2023. There’s speculation that the Federal Open Market Committee may cut interest rates soon, which could further soften mortgage rates in the months ahead. While this is promising, rates around 2% similar to those in 2021 are unlikely to return soon due to ongoing inflation worries, meaning that although some buyers might experience lower payments, homeownership may not become significantly more affordable for most people.

Due to these circumstances, assumable mortgages are becoming an appealing alternative for many. Here are the experiences of three homebuying couples who successfully obtained mortgage rates below 3% in recent months through this method.

Grace Lucchese and her partner, Mickey Ricard, became the youngest homeowners in their respective families after purchasing a home for $422,500 in January. Just as they were struggling with high rents in Sudbury, Massachusetts, they learned about assumable mortgages during their home search. The couple had faced fierce competition, submitting offers on multiple homes, only to find themselves outbid every time.

Eventually, they located a suitable 1,600-square-foot Colonial house built in 1885 that included an assumable mortgage with a 2.6% interest rate. By making a $13,000 down payment, their monthly payments are around $2,100, remarkably less than what they would have paid otherwise. With these savings, they are focusing on home renovations and veterinary expenses for their special needs dog, alleviating some financial pressure.

In another case, Brian Sankey, a retired military police officer, purchased his home in Elizabethtown, Kentucky, for $400,000 in June. He took advantage of a 2.75% assumable VA loan. This arrangement benefited both him and the seller, who could list the home at a higher price due to the buyer’s ability to assume the loan. Initially, the sellers hesitated to consider the assumption due to concerns over the time it would take, but ultimately, they agreed, and the entire process from viewing to closing took roughly six weeks. Sankey is now enjoying lower monthly payments, freeing up resources for living expenses and added discretionary income.

Lastly, Amy Yzaguirre faced significant financial hurdles after her cancer diagnosis in 2022. While living in an RV on her parents’ property in Tigard, Oregon, she and her husband began searching for a permanent home. They discovered a townhome listed for $416,000, which featured a 2.5% assumable loan. The ability to assume the seller’s loan would reduce their monthly payment to just over $2,100, as opposed to over $3,000 if they had pursued a traditional mortgage. This opportunity saved them at least $40,000 over time.

In March 2023, they secured the townhome for $418,900, putting down $48,000 while assuming the FHA loan. The funds they saved on their mortgage helped them manage outstanding medical bills and put them on track to pay down other debts, plus they bought a vehicle outright.

Overall, these stories highlight the benefits of assumable mortgages in a landscape of fluctuating rates, showcasing how strategic financing can lead to financial relief and stability for homebuyers.

Source: Business Insider