WHICH BUYDOWN TO CHOOSE

I am currently helping one of my clients to buy a condominium. Since it has been on the market for a while, the seller, instead of lowering the price (staying at $900,000), made a $35,000 offer, which could be used for the buydown by the buyer.

Buydowns have been around for a while, but there is still a certain amount of confusion about which one to choose.

The 3-2-1 temporary buydown is used to lower monthly payments. If, for example, the rate is 7.5%, it can be reduced to 5.5% the first year and 6.5% the following year, and then going back to the initial rate. The cost of the buydown can be paid by the seller or the developer. These programs can be attractive to anyone, especially those whose circumstances change through the years. When rates come down, the loan can be refinanced.

However, the qualifying process is based on the initial rate of 7.5%. In the meantime, the 2-1 permanent buydown allows to permanently lower the rate, in our example to 6.5%. Thus, it allows clients to qualify easier.

We had a conversation about the above two options during our recent staff meeting with Wendy Flynn from NewRez Wholesale. I encourage you to watch a video cut of her presentation if you want to understand how buydowns can help clients.

If you have a question, feel free to call me at (415) 225-7920 or send me an email at [email protected].

I promise to help.

Manny Kagan,
President,
Pacific Bay Financial Corporation

NMLS #205637
DRE #00824602