How to Get a Lower Rate than Everyone Else

The big complaint since summer of 2022? Rates are higher than they were during COVID. Sure. We all anticipate that rates will come down, but by how much and how long do we need to wait for things and rates to get good?

For awhile, the thing that made the most sense was a temporary buy down. Makes entry a little easier and takes a lot of pressure off when those big unknowns come up and it’s not covered under your home warranty or insurance costs. Or maybe you wanted to do a couple things right away and reducing your monthly payment early on enables you to do those sooner rather than later AND add equity right away.

But now we know rates are coming down so your buy down is just kind of chasing the market. That doesn’t really do you any favors if you aren’t getting that artificially low rate. So now what?

If it’s available to you, relationship discounts. Most big banks oftentimes offer a discount on a rate if you keep your money with that bank. There are thresholds you meet that correspond to numerical discounts and that’s how they determine your new rate. What this essentially translates to is that you are paying your bank to borrow your own money. So what’s the incentive to do that? If it were me, I don’t want to tie up “X” percent of my money in one particular asset. Paying to borrow your own money affords you the opportunity to stay diversified especially at an artificially lower rate.

This actually came up when I was chatting with a lender friend of mine. We realized that if someone had enough money with his bank, along with being well qualified of course, he might be able to offer someone a rate in the 4’s!!! When was the last time you heard about a new loan with a rate in the 4’s? It was probably at least 3 years ago at this rate.