Buydown Loans

What is a Conforming Buydown loan?  This type of loan is a fixed rate mortgage that includes a special feature, typically paid for by the seller of a home, that reduces the payment to amount equivalent to an interest rate, for example, 2% below the fixed note rate for the first year and 1% below the fixed note rate for the second year before rising to the actual fixed note rate for the remainder of the loan term (typically a 30 year fixed rate).  This is called a 2-1 buydown loan and it can be a good way for some buyers to ease into being a homeowner.  There are also 1% buydown loans (only 1% below the note rate for the first year) or even a permanent buydown where the buyer or seller pays to permanently reduce the fixed rate loan by prepaying a certain amount of interest upfront at the closing (known as discount points).  Which of these variations, like any type of loan choice, fits certain buyers better or worse than others so there is not neccesarily a "best" buydown.  The "best" option always depends on the buyer's unique situation, needs and means.  Talk to us and we'll educate you on the options so you make the right that works for you.