May 18, 2024

Clear skies. Low 53F. Winds W at 5 to 10 mph..
Clear skies. Low 53F. Winds W at 5 to 10 mph.
Updated: October 6, 2022 @ 4:56 pm
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Sarah Spann

Sarah Spann
In August, the median sales price for a residential single-family home in Greater Nashville was $475,000, up 15% from a year ago. Today’s interest rates are hovering around 6%, up significantly from the sub 3% rates that were quoted just a year ago.
These financial constraints are making it more challenging for first-time buyers to find affordable housing. According to the National Association of Realtors (NAR), higher mortgage rates and home prices have put affordability at its lowest point since 1989. The typical monthly mortgage payment, nationally, is up 54% from last year. While the outlook seems bleak, there are strategies to make your monthly mortgage attainable, and with homes continuing to appreciate in Nashville, homeownership is still a crucial piece to building wealth.
First, focus on paying off debts. Not only will paying off debt lower your total monthly expenses, but it will also improve your credit score. A higher credit score helps to reduce your cost of borrowing, meaning more loan options with better terms.
Another option is to pay mortgage insurance upfront. What is private mortgage insurance? PMI is a type of mortgage insurance that is required when making a down payment that is less than 20% of the home’s purchase price. PMI protects the lender’s investment in case you default on the loan. PMI is added into your monthly payment and can cost several hundred dollars per month. Once your loan-to-value ratio hits 80% you can request it to be removed. However, most lenders have the option to pay a lump sum fee to remove the PMI upfront.
You can also choose to “pay points” to lower your interest rate. Paying points is a fee, usually 1% of the loan amount for each point, paid to the lender at closing in order to lower your interest rate. While every lender’s terms are different, typically each point lowers the rate by 0.25%. For example, the monthly principal & interest on a $500,000 conventional loan with 5% down and a 5.5% interest rate is $2,697. Paying 1 point to lower the interest rate to 5.25% will lower your monthly payment to $2,622, a savings of $75 per month.
As the market continues to normalize, buyers have more opportunity to negotiate. Instead of focusing on reducing the sales price, consider negotiating a seller credit you can use to pay down your rate. Using the example from above, a $10,000 reduction in price only lowers the monthly payment by $50 per month. In contrast, negotiating a $10,000 seller credit that you can use to pay your rate down lowers your monthly payment by over $150 per month. That’s a BIG difference!
Most importantly, partner with a trusted Realtor and lender that will align a strategy to your goals. Every home purchase is different, so the approach should be tailored to your needs.
Born and raised in Wisconsin, Sarah found her way to Nashville in 2008 after graduating from college. After years in the corporate sector, Sarah moved into real estate, joining the Jacey Cook Homes Team at Compass RE in 2020. When she’s not hard at work with clients, you’ll find her spending time hiking Nashville’s beautiful trails, leading worship at church and training at her gym, CrossFit Forte, where she’s been training and coaching since 2012. 
Sarah Spann
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