Last week a well funded startup in our space shut down its business. It had promised buyers a way to get a 3% mortgage in a 6% world. Unfortunately, it didn’t quite deliver.

Today we're covering why it didn’t work, and more importantly, the four ways Utah home buyers are still getting a lower rate right now. And don’t worry, if you're thinking of selling anytime soon, this applies to you too.

Some mortgages are what's called "assumable," meaning a buyer can take over the seller's existing loan and keep the interest rate. Plenty of these homes are on the MLS right now, but nobody had pulled them together in one place.

That was Roam's idea. Launched in 2023, it built a nationwide marketplace just for assumable homes and walked buyers through the paperwork. With millions of homeowners sitting on rates in the 2-3% range, the company got a lot of attention and raised a lot of money.

However, as of last week, Roam's website says it no longer offers home search or assumption services with no comment from the company yet.

Really, there were two problems getting in the way of them building this nationwide marketplace.

1) The pool is shrinking. Only government backed loans (FHA, VA, and USDA) can be assumed. In early 2022, about 76% of those loans carried a rate under 4%. Today, about 40% of government backed loans are under 4%. Additionally, low rate loans pay down principal faster, so every year that passes, existing home owners get more and more equity, and fewer of their loans are worth assuming. More on that below.

2) The cash gap is huge. Say a home is listed at $400,000 and the seller owes $250,000 on their 3% loan. To assume it, the buyer has to cover the $150,000 difference in cash or with a second loan. Most buyers (especially first time home buyers), can't bridge that.

On top of that, lenders don’t love the idea of someone assuming a low interest rate mortgage when they could write a new loan for a much higher rate. Because of this, assumptions typically take several months to get approved, with little experience from realtors out there on how to help their clients through that process.

The good news is that you can still find assumable mortgages on the market right now. In fact, I’ve even set up filters for my clients to only see homes that have assumable mortgages. Those clients also know they will often need to come in with a large down payment due to most sellers with low rates having a large amount of equity.

But perhaps even better news is that assumable mortgages were never the only way to get a low rate right now. These four strategies are working for Utah home buyers right now and require less money out of your pocket.

1. Seller paid rate buy-downs. Instead of cutting the price, a seller pays the lender to lower your rate, either for the first couple of years or for the life of the loan. On the same purchase price, a rate buy-down often saves a buyer several hundreds of dollars more per month than an equivalent price cut. This is supper common in today’s market.

2. Builder buy-downs. Similar to pre-existing home sellers, builders are throwing in even bigger incentives to lower mortgage payments when purchasing a new home. To give an example, you can get a new construction home from Edge Homes right now with a 1.99% adjustable rate, 2.99% temporary rate that adjusts to 4.99% fixed in two years, or a 4.99% fixed rate for 30 years PLUS an additional ~$15K at closing to use towards upgrades, closing costs, etc. Yes, you read that right…. you can get as low as 1.99% right now.

3. Seller financing. When a seller owns the home free and clear, they can act as the bank. Terms are negotiable and the rate is often below what lenders are offering. It works best when the seller doesn't need all the cash at closing, but you can even get creative and negotiate a deal where you take over their existing mortgage in certain situations, but that comes with it’s own risks.

4. UCCU's rate plus 2 option. If you happen to have your current mortgage with UCCU, and they are still holding your loan (meaning they didn’t sell it to another lender), they will write you an in-house loan at your original rate plus 2%. So if you currently have a 3% mortgage on your home, you could sell your home and still get approved for a 5% permanent loan on any home purchase (including pre-existing homes), which is WAY better than the current 6.8% average for a 30 year mortgage.

If you've been hoping for a strategy to get a lower interest rate, even with rates climbing, there are some options available to you. Ask about buy-downs on every home you look at, including resale homes. It's a normal request in this market and it's one of the most affective ways for a seller to help you.

Want to know what a buy-down would do to your monthly payment? Reply with your price range and I'll run the numbers.

If you're sitting on a 3% rate and dreading giving it up, you're not stuck. A rate buy-down makes your home stand out to buyers, and it usually costs less than the price cut you'd otherwise make. And if your loan is with UCCU, you might have even more options available to you on your next home purchase.

If your home didn't sell the first time around, this is often the missing piece. Buyers are running the monthly numbers on every home they look at.

Thinking about listing but worried about your payment on your next home? Let's talk through your options to see what’s available to you. You might be in a better position than you realize.

There are real paths to getting a lower mortgage than what you’re seeing on the billboards. If you have questions about what applies to your situation, I'm always happy to walk through it.

Here to serve,

P.S. Curious what your home would sell for in today's market, or what's available in your price range right now? Reply with your address and I'll put together a custom market analysis, no charge, no obligation.