Beyond the Interest Rate: Incentives and the True Cost of Your Mortgage
Welcome back to the Welcome Home Radio Podcast! We’re concluding our “Your Turn to Ask” series with essential information for both buyers navigating complex financing options and sellers looking for the right incentives to attract today’s discerning market.
Borrower Beware: The Importance of Options and the Bank vs. Broker Difference
When you, as a borrower, are seeking financing, or you, as a realtor, are guiding your buyers, there should be an expectation that your finance professional will present you with options.
A good finance professional should:
- Show you options: They shouldn’t just force you down a single path unless your situation absolutely demands it.
- Explain the “Why”: If you must go down one path (e.g., FHA or VA), they should clearly explain why that is the best or only suitable borrowing situation for you.
- Present Differentials: As we discussed in the last segment, they should take the time to show you the difference between an FHA deal and a conventional deal, comparing down payment minimums and overall cost.
Mortgage Company vs. Bank
It’s critical for borrowers to understand the difference between seeking a mortgage from a bank versus a dedicated mortgage company:
- Banks: Banks handle credit cards, auto loans, commercial loans, savings, and checking—they do not specialize in mortgages. They often focus on a limited, “cookie-cutter” program, typically pushing for conventional loans with a high down payment (20%).
- Mortgage Companies (like ours): We can offer a wide variety of loan options (X, Y, A, B, C) because we specialize. This flexibility allows us to offer strategies and options that fit your specific financial situation, making the APR and overall cost closer to the interest rate.
The conversation about interest rate and APR is integral because it helps you understand the true cost of the loan, which is the most critical factor in choosing the best program for you.
For the Seller: What Incentives Attract Today’s Buyers?
A seller asked: What incentives attract today’s buyers?
The attraction starts before you even offer a concession. Today’s buyers are looking for a friction-free, move-in ready home.
Incentive #1: The Ready-to-Sell Home
Your first incentive is ensuring the home itself is a premium product. This means:
- Friction-Free Preparation: No outstanding issues with the roof, foundation, or windows. Make sure simple things like fresh paint, trimmed trees, and a cut lawn are taken care of.
- Build Trust: These simple acts—from great curb appeal to a solid inspection—add to the trust that the home is move-in ready, leading to smoother inspections and appraisals.
- Highest ROI: Statistically, the National Association of Realtors lists the front door as one of the biggest factors for a house to move faster. Painting or replacing your front door is often the highest return on investment you can make for curb appeal.
Incentive #2: The Financial Buydown
Once the home is prepared, be ready to offer financial concessions that reduce the buyer’s monthly payment. This is extremely opportunistic in the current market:
- Rate Buydowns: Be willing to pay for a 2-1 or 3-1 buydown. This is where you, the seller, pay to temporarily lower the buyer’s interest rate for the first one or two years of the mortgage. This makes the initial payments much more affordable.
- Concession Credits: Offer a $10,000 concession credit or another dollar amount that helps the buyer cover closing costs. Anything that helps them get into the home more easily is a major incentive.
The Changing Landscape of Realtor Fees
Sellers also need to be aware of the changing conversation around realtor compensation—a direct result of industry legal changes. Sellers are now expected to be more savvy and negotiate what they are willing to pay:
- Listing Agent Fees: You must negotiate the fee you will pay your listing agent to sell your home.
- Buyer’s Representative Fees: You must also have a clear understanding of how the buyer’s agent is compensated. You may be willing to pay some of that fee, but it is no longer hidden or automatically covered by a blanket industry standard.
Sellers must negotiate these costs instead of simply accepting, “Well, this is what the industry does.”
Final Takeaway
The housing market is real and live; it hasn’t shut down. Buyers and sellers are out there, and families are still growing. The key to success is preparation, understanding your options, and seeking professional guidance.
We thank you for your time. Find us at welcomehomeradio.net to submit your questions.
We’re here to help you get to CTC—Clear to Close!
My name is Blair Thomas. And I’m Tom Holm. God bless.
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