Back

How Our Homebuyers Are Beating Rising Interest Rates: Discover Benefits of a Buydown

Monday, November 6, 2023

So, you've been hearing all the buzz surrounding the real estate market, right? Crazy prices, rising interest rates – it's a lot. But here's some good news in the mix: there's an option called the 2-1 Temporary Buydown that can give homebuyers an affordability boost when they need it, early on in their loan. Let's break it down.

The 2-1 Temporary Buydown: In Plain English

Ever wish you could just turn back the clock a few years and "buy down" those higher interest rates for a bit? Well, guess what? You may be able to. In the first year, you pay a set amount to buy the interest rate down by 2 percentage points. In year two, it's 1 percentage point. By the third year, things go back to the initial interest rate you first signed up for. Smooth, huh?

Why Now's the Time to Consider It:

Remember the good ol' days of super-low interest rates? Yeah, we do too. Now that rates are climbing back up, this buydown option isn't just a relic from the past – it's a clever move for today's market. It isn't just for first-time homebuyers either, even seasoned homebuyers can leverage a buydown to boost their buying power. Think of it as an old-school tool making a big comeback, thanks to the massive shift in the interest rate environment.

A Little Insight from the Seller's Side

Imagine you're selling your house. Instead of reducing your list price (say a $15K cut if your property is on the market for a while), you could opt to subsidize the buydown for a lesser amount. It's a win-win since you can maintain your sales price and your buyers get an affordability boost.

What's In It for You, the Buyer?

Think of the first two years as a little "welcome to homeownership" period, where you save on payments and make your new house into a home. It's crucial to note that, despite the initial lower rates, borrowers are still qualified based on the original, higher rate. This ensures no "payment shock" surprises when rates normalize in the third year. Preparation is key, after all.

Our Take on All This:

We've been keeping an eye on things (like we always do), and when we spot an opportunity like the 2-1 Buydown, we want to share. We're all about helping folks navigate the sometimes-bumpy home-buying journey. Whether it's this or the next big thing in affordability and market advantages, we're on it.

Wrapping It Up:

Navigating the real estate maze can be... well, a maze. But tools like the 2-1 Temporary Buydown? They're like a power-up for those looking to level up their home-buying game. Whether you're making your first home purchase, re-entering the real estate market to upgrade or downsize, or even if you're on the selling side, getting savvy with strategies like this can be a game-changer. As the journey unfolds, this is one power move you'll want to have up your sleeve, and our Mortgage Consultants are the advisers you want in your corner and in your contacts!

Available for conventional, FHA and VA fixed-rate loan products only. A temporary rate buydown may not be the best option for all borrowers. Contact your mortgage consultant to determine the best loan option for you.

1. The content of this distribution is for informational purposes only. Loan Amount is based on 80% loan-to-value of the median existing home sales price of $394,300, according to National Association of REALTORS®. “Existing-Home Sales Fell 2.0% in September” October 19, 2023. https://www.nar.realtor/newsroom/existing-home-sales-fell-2-0-in-september Accessed October 30, 2023.

2. A subsidy fund is required and must be paid for by either a property seller or builder. Funds must be placed in a custodial bank account and applied toward the buyer’s monthly payments as they come due per the loan’s payment schedule.

3. Interest rate and annual percentage rate (APR) are based on a 740 credit score and current market conditions as of 10/31/2022, are for informational purposes only, are subject to change without notice and may be subject to pricing add-ons related to property type, loan amount, loan-to-value, credit score and other variables. Estimated closing costs used in the APR calculation are assumed to be paid by the borrower at closing. If the closing costs are financed, the loan, APR and payment amounts will be higher. If the down payment is less than 20%, mortgage insurance may be required and could increase the monthly payment and APR. Contact us for details. Additional loan programs may be available. Accuracy is not guaranteed and all products may not be available in all borrower’s geographical areas and are based on their individual situation. This is not a credit decision or a commitment to lend.

4. Buyer’s payment amounts represent the cost of monthly principal and interest only. Taxes, property insurance, and mortgage insurance are NOT included in this example. Calculations based on 30-year fixed rate conventional loan with a 20% down payment. The loan options listed before may not be the best product for all borrowers. Some restrictions apply. Not all borrowers will qualify. Consult your mortgage consultant to discuss your financing options.

See all articles

Other news

Market Update - May 20, 2024
View full article
Market Update - May 10, 2024
View full article
Tips to Actually Buy a House: Your No-Nonsense Guide
View full article
Market Update - May 3, 2024
View full article
National Home Valuation Week 2024
Empowering Homeowners and Real Estate Professionals with Advanced Valuation Technology
View full article
Financing a Greener Future: Home Equity Solutions for Eco-Upgrades
View full article
Navigating Home Equity Options for Renovation Projects: Beyond the Basics
View full article
Seize the Moment: Why Now May Be the Perfect Time to Buy Your Dream Home
View full article
Why Real Estate Still Reigns Supreme as the Best Long-Term Investment
View full article
How Our Homebuyers Are Beating Rising Interest Rates: Discover Benefits of a Buydown
View full article
Capitalize on Multi-Unit Living: Your Home, Your Investment, With as Little as 5% Down
View full article
Unlocking the Potential: 4 Ways to Use Your Home Equity
View full article
National Mortgage Professional Month: Celebrating Our Teams!
View full article
Navigating the Modern Mortgage Landscape: A Closer Look at Debt Service Coverage Ratio (DSCR) Loans
View full article
HomeServices Lending Earns Top Spot for Customer Satisfaction in 2022 Mortgage Industry Rankings
View full article
Market Update - June 21, 2023
View full article
Market Update - June 23, 2023
View full article
Market Update - April 28, 2023
View full article
FHFA Loan Level Price Adjuster Clarification
View full article
Market Update - 4.20.23
View full article
Market Update - 4.13.2023
View full article
Market Update
View full article
Buyer's Bridge Loans: What They Are and How They Work
Buy now and sell later with our Buyer's Bridge loan. Don't let a dream home slip away while waiting on a pending sale!
View full article
Rate Rollback Guarantee
Obtain lower initial mortgage payments and long-term security
View full article
FHFA Announces Higher Loan Limits for 2023
As the result of a higher average U.S. home price in 2022, the Federal Housing Finance Agency (FHFA) has announced new, higher maximum conforming loan limits for 2023.
View full article
November Journal 2022
If you're feeling nostalgic for 2021 prices, you're not alone.
View full article
Government Home Loan Programs
Conventional mortgage loans are popular, but government home loans may offer unique options worth considering.
View full article
FHA Home Loans
The FHA offers fixed rate mortgages with a low down payment for home buyers and a streamlined refinance process for homeowners. 
View full article
USDA Guaranteed Rural Housing Program
The USDA Guaranteed Rural Housing program extends 100% financing opportunities to eligible rural individuals and families for the purchase of safe and sanitary dwellings
View full article
Lock, Shop & Home!
Rising rates? No Property? No problem! Submit your loan application & lock in your interest rate!
View full article
Freddie Mac BorrowSmart Program
We understand that the expense of a down payment and closing costs can present a challenge for many would-be home buyers. That’s why we offer Freddie Mac BorrowSmartSM, a loan program designed to help customers purchase a home with less money out of pocket.
View full article