Home builders try to entice buyers with low interest rates
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Some home builders are cutting interest rates as a further incentive to home buyers. From the Wall Street Journal:
As mortgage rates fall to near historic lows, some home builders are offering even lower interest rates, in an effort to lure buyers amid the slow spring selling season. The latest sales promotion: Lennar Corp. is offering a fixed 3.625% rate over the life of a 30-year fixed rate mortgage. The deal is besting average rates that have fallen below 5% nationwide, but it comes as other builders are reporting mixed results from similar incentives. Hovnanian Enterprises Inc.’s recent offer of a 3.99% rate sparked ‘underwhelming’ interest from home buyers, says Dan Klinger, president of the builder’s mortgage operation. ‘It wasn’t like we needed crowd control,’ says Mr. Klinger.
How low they can go to lure buyers is regulated however.
Federal regulations limit how much the builders can contribute to buy down mortgage rates. Currently, if a home buyer puts down 5% or less, the builder is limited to incentives worth 3% of the sales price, says Mr. Klinger. For downpayments of 10%, the limit climbs to 6%.
Meanwhile, by comparison, the Mortgage Bankers Assn. released its Weekly Mortgage Applications Survey today. From the news release:
The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.61 percent from 4.63 percent, with points decreasing to 1.03 from 1.13 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The contract rate is a new record low for the survey, which began in 1990.
Takes some of the shine off those builders’ rates.
-- Lauren Beale
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