Did You Know? In today's current, seller-paid rate buydowns are extremely popular with most of my clients! As homes stay on the market longer, home sellers are offering incentives for you to purchase their home, including seller-paid closing costs!
As your lender, I will work closely with your real estate agent to provide the exact seller-paid closing costs needed to close your loan with this program. I also offer 3-2-1, 2-1 and 1-0 configurations (explained below) depending on the amount of costs you receive from the seller.
Scott Buehler and his team would love to assist you with a seller-paid buydown home purchase! When you are ready to get pre-approved and shopping for homes, take a moment to fill out this brief questionnaire or call (435) 590-1019.
A 2-1 Seller-Paid Rate Buydown Benefit Demonstration
Looking for a Jumbo rate buydown mortgage option? Scott Buehler now has a Jumbo version of the seller-paid mortgage interest rate buydown for loans over the conventional conforming limits. For more information, ask me about this option for more details today!
I highly recommend watching the video I've created above to see the math behind this program. Once you see the numbers, you'll see why this mortgage solution is a popular choice with most of my clients that are purchasing a primary residence or second home.
Seller-Paid Temporary Buydown Advantages
Unlike a permanent buydown to buy down your interest rate, there's key advantages to this mortgage solution that you should be aware of!
- The pre-paid interest cost will typically come from the seller.
- Pre-paid interest will sit in a separate account which is used to make your mortgage payment whole each month. Should you refinance, any unused portion of these funds will apply directly to your mortgage principal, further reducing your payment.
- Lower interest rate for the first 3, 2 or 1 years of your purchase, resulting in a lower payment at the beginning of your mortgage. This could be helpful if you need funds to buy furniture, renovate or to turn your new house into home.
- Use a seller-paid interest rate buydown with conventional (Fannie Mae or Freddie Mac), FHA, VA, USDA, or Jumbo. With USDA and Jumbo, only the 2-1 or 1-0 seller-paid rate buydown options are available.
- Refinance with ease. Guild Mortgage would be your loan servicer which offers certain advantages when going through the refinance process. You may also be eligible to have the mortgage fees waived on your refinance with Guild Mortgage's Homebuyer Payment Protection Program.
Did you know? In order for this program to work, you need a lender that will work closely with your real estate agent so that the right amount of seller-paid closing costs is included in your purchase contract. Scott Buehler is extremely experienced and can get the minimum seller-paid closing costs figures within seconds using his custom-built calculator.
Seller-Paid Temporary Buydown Illustration
This is a 2/1 temporary buydown illustration assuming a $500,000 purchase price, 5% down, $15,000 (3%) in seller-paid closing costs and a buydown cost of $10,900. It includes title fees, appraisal fee and other required closing costs to estimate your cash to close.
As you can see, utilizing $10,900 in seller-paid closing costs allows for you to save $595.56/month on your first years' payments and $305.32 on your 2nd years' payments if your locked interest rate is 6.5%*.
* Your actual rate, payment, and costs could be higher. Get an official Loan Estimate before choosing a loan. Based on 0.5% property tax and 0.2% homeowner's insurance.
What is the Difference Between a 3-2-1, 2-1 and 1-0 Temporary Buydown?
For each option, be sure to understand that it is based on the note rate, meaning, the qualifying rate of your mortgage after the rate buydown ends.
- 3-2-1 Seller-Paid Rate Buydown: Using this program, you will see a 3% reduction on your interest rate for the first year, a 2% reduction on your interest rate for the second year and finally, a 1% reduction on interest rate for the third year. If your interest rate was 6.5%:
- Year 1: Payments based on a 3.5% interest rate.
- Year 2: Payments based on a 4.5% interest rate.
- Year 3: Payments based on a 5.5% interest rate.
- Years 4-30: End of the mortgage rate buydown. Your 6.5% note rate would apply.
- 2-1 Seller-Paid Rate Buydown: Using this program, you will see a 2% reduction on your interest rate for the first year and a 1% reduction on your interest rate for the second year. If your interest rate was 6.5%:
- Year 1: Payments based on a 4.5% interest rate.
- Year 2: Payments based on a 5.5% interest rate.
- Years 3-30: End of the mortgage rate buydown. Your 6.5% note rate would apply.
- 1-0 Seller-Paid Rate Buydown: Using this program, you will see a 1% reduction on your interest rate for the first year. If your interest rate was 6.5%:
- Year 1: Payments based on a 5.5% interest rate.
- Years 2-30: End of the mortgage rate buydown. Your 6.5% note rate would apply.
Wouldn't I automatically default to the 3-2-1 rate buydown?
For most buying scenarios, the 2-1 buydown is the most popular choice. Why? The required costs is most likely to work in seller negotiations.
Using the above scenario on this mortgage solutions page, a $500,000 purchase with $25,000 down, the following seller-paid closing costs are required:
- 3-2-1 Buydown: $21,300
- 2-1 Buydown: $10,900
- 1-0 Buydown: $3,700
I recommend the 3-2-1 seller-paid mortgage rate buydown option when working with new constructions. Your builder can price in credits to your overall construction cost to help make payments easier for the first 3 years.
Otherwise, buying an existing single-family residence, you will likely experience a negotiation that can accommodate a 2-1 or 1-0 buydown but will find it difficult to to reach for that higher cost 3-2-1 option.
Jumbo Seller-Paid Rate Buydown Lender
For those that qualify, a buyer can get a jumbo seller-paid rate buydown that will:
- Occupy the home as their primary residence.
- Buy a single-family residence, condo or townhome.
- Provide 20% down payment up to $2,000,000 loan with a 720+ credit score.
- Provide 10% down payment up to $900,000 with a 710+ credit score.
- Receive a gift, with options available.
Certain restrictions apply. Please talk to Scott Buehler to learn more about this program to see if you will qualify.
Is a Seller-Paid Rate Buydown Right for Me?
With Scott Buehler as your preferred rate buydown lender, you will receive a Total Cost Analysis that breaks down the monthly payments using this program. It really helps to see the numbers specific to you, your available interest rate, your home purchase goals and what a refinance might look like.
If a seller-paid rate buydown sounds amazing for you, please contact Scott today or click the button below to fill out a quick questionnaire. Scott Buehler or a member of his pre-approval team will be in touch with you shortly, usually within 30 minutes (sometimes in seconds).
Disclaimer: Loan terms and limits subject to change. This page is meant for educational purposes and is not a commitment to lend. To qualify for a home loan, please speak to Scott Buehler or apply online.