Temporary Buydowns

Temporary buydowns are great solutions for buyers looking for a lower payment for those first few years. A temporary buydown fee can reduce the rate by 3%, 2% or just 1% per year.

For example, on a 2/1 buydown rate is reduced by 2% in the first year and 1% in the second year, then remains at the note rate for the remaining life of the loan for fixed-rate loans. These buydowns work great when the seller provides sales concessions to assist in the buydown program.

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Product highlights

3/2/1 buydown, 2/1 buydown or 1/0 buydown options available
Available on most Conventional, FHA, and VA loans
Purchase transactions for primary and second homes only
Seller, builder, or lender must fund the buydown
Borrower’s rate cannot increase more than 1% per year including the buydown annual increase
Borrower qualifies for monthly payment at the note rate (if a fixed rate) not the temporary rate reduction

Borrower advantages

Frees up cash in the beginning of the loan, allowing buyer to ease into monthly payments
Extra cash is particularly handy for costs after purchasing a home (furniture, landscaping and home improvements, etc.)
If paid off through a sale or refinance, any remaining buydown fees are returned and paid against the balance

Realtor advantages

Provides the ability to offer an incentive to buyers without lowering the list price
Seller can buydown the rate for their buyer and create an optimal solution