HELP LOWER YOUR INTEREST RATE BY UP TO 3% AT THE START OF YOUR LOAN
Give yourself extra flexibility with a lower monthly payment by using a Temporary Rate Buydown to lower your interest rate at the start of your loan. It’s a great option for almost any borrower, especially if you:
- Expect an increase in your income in the next few years
- Have excess seller concessions to use and want to take advantage of a low fixed rate
- Are looking to do renovations, make upgrades, or buy furniture for your new home
- Are going from renting to buying and want to ease into their mortgage with a lower payment
Temporary Rate Buydowns are available for:
- Conventional primary and second home purchases
- FHA and VA primary home purchases
Choose between these seller- or lender-paid 1-, 2- and 3-year Temporary Rate Buydown options:
- 3-2-1 buydown: A buydown of 3% in the first year, 2% in the second year, 1% in the third year, then back to the original locked rate in the fourth year for the duration of the term.
- 2-1 buydown: A buydown of 2% in the first year and 1% in the second year, then back to the original locked rate in the third year for the duration of the term.
- 1-1 buydown: A buydown of 1% in the first two years, then back to the original locked rate in the third year for the duration of the term.
- 1-0 buydown: A buydown of 1% in the first year, then back to the original locked rate in the second year for the duration of the term.
Here’s an example of the potential savings on a 3-2-1 seller-paid buydown:
| Conventional 30-Year Fixed 3-2-1 Temporary rate Buydown on a $350,000 loan for a borrower with a 700 FICO and a 90% LTV | |||||
| 3-2-1 Temporary Rate Buydown | Interest Rate | Monthly Payment* | Monthly Savings | Yearly Savings | |
| Year 1 | 3.75% | $1,620.90 | $649.19 | $7,790.28 | |
|---|---|---|---|---|---|
| Year 2 | 4.75% | $1,825.77 | $444.32 | $5,331.84 | |
| Years 3 | 5.75% | $2,042.50 | $227.59 | $2,731.08 | |
| Years 4-30 | 6.75% | $2,270.09 | – | – | |
| $15,853.20 | |||||
*The principal and interest payment on a $350,000 30-year Fixed-Rate Loan at 6.750% and 90% loan-to-value (LTV) is $2,270.09. The Annual Percentage Rate (APR) is 7.138% with estimated finance charges of $5,600. The principal and interest payments, which will continue for 360 months until paid in full, do not include taxes and home insurance premium, which will result in a higher actual monthly payment. Rates current as of 11/16/22. Subject to borrower approval. Some exclusions may apply.
- The borrower must qualify for the full monthly payment (before the buydown rate is applied)
- For the seller-paid option, seller concessions are deposited as a lump sum into a buydown account. A portion of this sum is released each month to reduce the borrower’s monthly payments.
- Use the Temporary Rate Buydown Calculator in The Source to check borrower eligibility