Get the latest insights from a top producing loan officer on the frontlines of the housing market
Get the latest insights from a top producing loan officer on the front lines of the housing market
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:
A lower interest rate for the complete 30 years
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.
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:
A lower interest rate for the complete 30 years
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.
(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
(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
(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