As the real estate market shifts, the equilibrium between buyers and sellers shifts as well. For example, a property that would’ve been caught in a bidding war previously may now be on the market much longer. As a seller, this can be discouraging, especially if they are trying to purchase and move into another home quickly.
In order to sell, sometimes the homeowner needs to execute more than simply staging, cleaning, and decluttering the house. As a buyer, negotiations can extend to asking the seller to cover extra fees such as closing costs and home inspections, which can bring the overall cost of the home down.
Enter: The Temporary Interest Rate Buydown program. By asking the seller to cover extra fees and/or closing costs, this artificially suppresses the interest rate for one to two years. Assuming by year three the buyer can refinance or sell the property, this option saves them thousands of dollars in monthly interest over the first year or two (depending on which option they go with).
2-1 Temporary Buydown (30 Year Fixed loan term)
- 2% lower interest rate in the first year
- 1% lower interest rate in the second year
*Example: For a mortgage loan amount of $416,000, here is an example of what a borrower can expect:
1-0 Temporary Buydown (30 Year Fixed loan term)
- 1% lower interest rate in the first year
Which loan programs are eligible for the temporary rate buydown?
Our temporary buydown program is for purchase loans covering Fannie Mae, Freddie Mac, FHA, and VA fixed-rate mortgages. It’s funded by an escrow account carrying a credit balance, which can be contributed to by the seller or even a real estate agent.
What is the cost to procure this financing?
The discount fee is calculated by the gross monthly savings incurred during the buy down period in relation to the note rate of when the loan was locked.
Using the numbers from the example above, you would take the payment at the full note rate ($2,491.46) and subtract the temporary buydown rate payment ($2,230.64) to get a monthly savings of $260.82. Multiply this by 12 to get the total fee of $3,129.84.
If you have any questions regarding our Temporary Buydown program, please contact us at (760) 930-0569 and one of our loan officers will be happy to assist you.
*Both examples are based on a fixed interest rate of 5.99% and a loan amount of $416,000