Real estate crime: How this family just got their dream home with a 2.5% mortgage.

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Stephen and Anslie Spitler were at a loss: They were expecting a third child and their 1980s-built, three-bedroom house could no longer accommodate their growing family. In addition, the couple couldn’t find an affordable home that fit their need for more space and was in a good school district—a feature the two Georgia-based high school teachers prioritized.

The Spitlers wanted to find their forever home, but the more they looked, the more out of reach it seemed. When many home buyers consider what it was like to buy a single-family home a few years ago—when the 30-year fixed rate mortgage was less than 3%—compared to buying that home today, the affordability gap feels like a chasm. . But the couple found a way to close the gap: a possible mortgage.

At the end of June, the Spitler family closed on their dream home. Using real estate site Roam, the Spitlers found and bought a house with an average interest rate of 2.5%. This is the house they wanted to raise their children in—and now they can’t afford it.

How equity mortgages work

Before crossing over to Roam, the Spitlers had never heard of mortgages and were skeptical. But when Stephen saw that Roam was supported by companies like Opendoor, he thought it was worth a look.

They quickly found what they were looking for on the Roam website. It was a five-bedroom home built in 2018, complete with a finished basement and a pool, located in Jackson County, Georgia, an area Anslie described as coming with good schools. This was their dream home—and the owner had an affordable mortgage with an interest rate of 2.5%.

So, what is a possible mortgage?

A contingent loan allows the existing mortgage on the property to be transferred to the purchasers of the property. The mortgage consideration conveys the interest rate of the existing loan, the remaining balance of the loan, and the remaining term of the loan.

Consideration clauses are often found on federally backed mortgages, including FHA, VA, and USDA-backed mortgages. However, these only make up a small portion of real estate sales at any given time, about 10% to 15%, according to Keith Gumbinger, a real estate industry expert with more than three decades of experience and vice president of HSH.com, a. publisher of mortgage and consumer loan information.

Today’s market conditions make the idea of ​​a mortgage rate especially attractive, as current mortgage rates and affordability levels are very different from those in early 2021.

ResiClub reported in May that the effective rate on outstanding US mortgages is 4.0%—much lower than the current average 30-year mortgage rate of 6.87%.

“Many people are shocked by this but in reality they are millions [potentially] loan,” Roam CEO Raunaq Singh told ResiClub in November.

Is there a catch?

A 2.5% mortgage in 2024 may sound too good to be true—and for many it is. And the process is not without some obstacles.

“Considering loans are available, but most, they are not,” Gumbinger explained.

There are two main obstacles to buying a home with a low mortgage rate:

1. A home buyer usually needs to make a difference between the outstanding loan balance and the home purchase price. Because of the rapid rise in housing prices over the past few years, a home buyer looking to take out a low-cost mortgage will likely need to hold down a large amount of cash to make it work.
2. A home buyer must work with a seller’s lender, who is not always motivated to help and may not be familiar with the process.

“Unlike making a new loan for a buyer, helping you consider an existing loan is probably not a profitable process for your existing lender,” Gumbinger tells ResiClub. “The borrower or the borrower’s representative will likely have to be proactive in moving the process along.”

To reduce these friction points, Roam offers services to help consumers like the Spitler family.

First, the Roam Boost product allowed the Spitlers to take out a second loan to get the big down payment they needed to take the 2.5% rate. The Spitlers will pay a “compound” rate of 4.5% until the second loan is paid off.

But even taking a second loan, the numbers are still in their favor. Compared to buying a home at the current market interest rate, the Spitlers are saving $660 a month now and will save $1,280 a month once the second mortgage is paid off.

In addition, Roam connected Stephen and Anslie with a vetted agent who is skilled in explaining and organizing the loan appraisal process. Roam’s Singh told ResiClub in November that the company is “your way to go back through that process and connect you all the way through.”

It’s important to note that even when Anslie was looking at homes on Roam.com, he knew he wasn’t going to settle for a place that wasn’t perfect just because it had a low mortgage attached to it.

“Because there is a loan available for the given item [area] “It doesn’t mean that the attached home is suitable, desirable, and affordable for your needs and budget,” Gumdinger said. “For many borrowers, finding the right home is likely to be very important, and if a low-cost mortgage can be had, that would be a bonus.”