Get the latest insights from a top producing loan officer on the front lines of the housing market

Get the latest insights from a top producing loan officer on the front lines of the housing market

The mortgage industry is very dynamic - loan programs, guidelines, interest rates and market appetite are constantly changing. Stay up to date on the latest news surrounding the real estate market and mortgage industry by reading my articles below.

The mortgage industry is very dynamic - loan programs, guidelines, interest rates and market appetite are constantly changing. Stay up to date on the latest news surrounding the real estate market and mortgage industry by reading my articles below.

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What is a 2-1 buydown and how is it beneficial to prospective home buyers?

October 31, 20222 min read

A 2-1 buydown is a temporary interest rate improvement of 2% for the first year of the mortgage and a 1% improvement for the second year of the mortgage. On the third year of the mortgage, your rate will convert to the full note rate for the remainder of the loan. 

The main benefit to this program is a lower monthly payment for the first two years of the mortgage which can especially benefit clients during this high interest rate environment. 

An interesting note, the 2-1 buydown can only be paid for by the sellers. A buyer cannot pay for the 2-1 buydown, so the realtor must negotiate the proper amount of seller concessions to make this possible. 

This sounds great right?

What people fail to mention is that while a 2-1 buydown will temporarily lower the monthly payment, it will not increase your buying power. 

When using a 2-1 buydown, your DTI is still based on the note rate (not the initial reduced rate). 

The amount of points charged for the 2-1 buydown varies. 

My proposition is the following: Utilize the same amount of seller concessions to simply buy down the rate regularly (permanent buydown). Yes, the initial savings towards the interest rate may not be as much as 2%, however, going the route you will accomplish two things: 

  1. A lower interest rate for the complete 30 years

  2. Higher approval amount

There is not a right or wrong answer. It boils down to what you prioritize. 

If your priority is to minimize your monthly payment as much as possible, then the 2-1 buydown is a viable option. 

If your priority is to increase your loan approval amount, then you will need to buy down the interest rate using the traditional method of paying discount points. 

All in all, everyone's situation is different. To discuss your scenario in more detail, feel free to set a time with me to answer your questions and guide you in the right direction.


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blog image

What is a 2-1 buydown and how is it beneficial to prospective home buyers?

October 31, 20222 min read

A 2-1 buydown is a temporary interest rate improvement of 2% for the first year of the mortgage and a 1% improvement for the second year of the mortgage. On the third year of the mortgage, your rate will convert to the full note rate for the remainder of the loan. 

The main benefit to this program is a lower monthly payment for the first two years of the mortgage which can especially benefit clients during this high interest rate environment. 

An interesting note, the 2-1 buydown can only be paid for by the sellers. A buyer cannot pay for the 2-1 buydown, so the realtor must negotiate the proper amount of seller concessions to make this possible. 

This sounds great right?

What people fail to mention is that while a 2-1 buydown will temporarily lower the monthly payment, it will not increase your buying power. 

When using a 2-1 buydown, your DTI is still based on the note rate (not the initial reduced rate). 

The amount of points charged for the 2-1 buydown varies. 

My proposition is the following: Utilize the same amount of seller concessions to simply buy down the rate regularly (permanent buydown). Yes, the initial savings towards the interest rate may not be as much as 2%, however, going the route you will accomplish two things: 

  1. A lower interest rate for the complete 30 years

  2. Higher approval amount

There is not a right or wrong answer. It boils down to what you prioritize. 

If your priority is to minimize your monthly payment as much as possible, then the 2-1 buydown is a viable option. 

If your priority is to increase your loan approval amount, then you will need to buy down the interest rate using the traditional method of paying discount points. 

All in all, everyone's situation is different. To discuss your scenario in more detail, feel free to set a time with me to answer your questions and guide you in the right direction.


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VirtuaLending | NMLS #2015906

Isaac Sanchez | NMLS #1992428

9267 Haven Ave, 220,

Rancho Cucamonga, CA 91730

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(NMLS Lic. #2015906) Is an equal housing lender. This is not a commitment to lend or extend credit. Programs, rates, terms and conditions are subject to change without notice. Terms and conditions apply. All rights reserved. Contact us for details. Consult your accountant about tax deductions. NMLS Consumer Access

VirtuaLending Isaac Sanchez Top Loan Officer

VirtuaLending | NMLS #2015906

Isaac Sanchez | NMLS #1992428

9267 Haven Ave, 220,

Rancho Cucamonga, CA 91730

Isaac Sanchez Top Producing Mortgage Lender VirtuaLending

(NMLS Lic. #2015906) Is an equal housing lender. This is not a commitment to lend or extend credit. Programs, rates, terms and conditions are subject to change without notice. Terms and conditions apply. All rights reserved. Contact us for details. Consult your accountant about tax deductions. NMLS Consumer Access

VirtuaLending | NMLS #2015906

Isaac Sanchez | NMLS #1992428

9267 Haven Ave, 220,

Rancho Cucamonga, CA 91730

Isaac Sanchez Top Producing Mortgage Lender VirtuaLending

(NMLS Lic. #2015906) Is an equal housing lender. This is not a commitment to lend or extend credit. Programs, rates, terms and conditions are subject to change without notice. Terms and conditions apply. All rights reserved. Contact us for details. Consult your accountant about tax deductions. NMLS Consumer Access