Last Updated on October 31st, 2022. Original: October 31st, 2022
Use a 2-1 temporary buydown to get a two-year reduction of your mortgage payment when purchasing your new home in the Inland Empire. This option is currently available on fixed rate Conventional, FHA and VA home loans.
A 2-1 buydown allows the seller to offer a credit that is used to lower the buyer’s monthly mortgage payment for the first 24 months. In the first year the borrower makes a payment that is 2% below the fixed interest rate on the mortgage, 1% below in the second year and then at the full fixed rate from the third year on. For example, if they buyer’s purchase loan is a 30-year fixed rate of 6.50%, then in year 1 the payment will be calculated using a 4.50% rate and then year 2 the payment will be calculated using a 5.50% rate. After this, the payment will move up to the actual note rate.
Buyers can save significant money their first two years by making a payment that is below current market rates with a graduated increase up to the actual payment in year three. This eases the new homeowner into the full mortgage payment over two years. This approach keeps the borrower’s expense below the current market while allowing time for rates to potentially decrease. After the first two years of ownership the buyer will be more prepared for the final higher payment or potentially interest rates decrease enough to refinance to a lower rate.
This financing offer is available to both first-time and repeat homebuyers in the Inland Empire. It is only available on fixed rate conventional, VA and FHA purchase loans, not on refinances. The buyer must still qualify with the payment at the full interest rate on the loan. So, having a smaller payment in the first two years doesn’t qualify the buyer for a higher priced home. Each lender may have a different set of terms. This is where A+ Home Loans steps in to assist you with your 2-1 temporary buydown home mortgage.
The danger exists that the borrower overextends his/her finances while the payment is temporarily lower and is not prepared for the regular, higher payment when it comes. Homebuyers who plan to refinance after the buydown ends may be locked into the rate if the interest rates don’t decrease during the buydown period. At A+ Home Loans, we work with the buyers to understand the pros and cons of the 2-1 temporary buydown.
Call, text, or email A+ Home Loans to determine if you qualify for the 2-year buydown program.