It is a truism of real estate that people need to buy and sell homes in every market, and so as conditions change, different strategies are used to make the process feasible.

With interest rates soaring to over 7%, the cost of monthly payments has priced some people out of the market, so recently some participating builders and their lenders have partnered up to help make the cost of home ownership affordable again.

As case in point, at The Dwellings of Soquel, our midsize 3 Bedroom, 2.5 Bath townhomes are priced at $1,250,000. If you come in with 20% down, the monthly mortgage payment at a market rate of 7.25% comes to $6,821.76 per month. 

Under our Builder Forward program being offered, thanks to incentivized payments underwritten by the builder you are able to lock in a 30-year fixed rate at 4.99%, which gets your loan payment down to $5,362.11 per month. That’s a difference of $1,459.65 per month, which comes out to $17,515.80 in savings per year, or $525,474 over the life of the loan.

As an alternative, if you opt to not use the opportunity to cut your interest rate, it may be possible to get the home for a discounted price of $1,195,000, which with 20% down payment would amount to you paying about $11,000 less up-front. 

But consider this: With payments at an extra $1,104.50 per month for a market rate loan, factoring in property taxes and insurance, you would need to refinance or pay off the loan within the next 10 months in order to keep your monthly costs from outstripping your up-front savings, and the entire difference in purchase price would be eaten up in just over 4 years.

The Builder Forward loan program is an interesting option that helps make it possible to buy a home today which you might otherwise have had to wait to be able to afford.

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Cornerstone First Mortgage, Inc. supports Equal Housing Opportunity. NMLS ID# 173855. All products are subject to credit and property approval. Programs, rates, program terms and conditions are subject to change without notice. Not all products are available in all states for all amounts. Other restrictions and limitations apply. *Scenario is an estimate only and is based on a 740 FICO score on a 30 year (360 months) Conventional fixed-rate mortgage at a loan amount of $1,000,000, 80% LTV, rate of 4.99%, and APR of 5.253%, 1 point origination, owner occupied purchase. Offer valid on select models and subject to change without notice. Conditions and restrictions apply. 4.99% rate is based on a builder paid forward commitment to buydown the market rate (1 point = 1% of the loan amount). Payment scenario does not include HOA fees (if applicable) and the actual payment obligation may be greater. The actual number of points paid will vary and will be determined based on the amount necessary to lower the market rate to 4.99% at the time of rate lock. The forward commitment may not be available on all loan programs and is subject to availability of funds, which is confirmed with a full loan approval and rate lock in. Homes must close prior to forward commitment expiration to qualify; see your builder representative for further details on expiration terms and available homesites. Borrower is not required to finance through CFM but must use CFM to receive incentives. This is not a commitment to lend.