Buy Down Mortgage

A mortgage buy down is an arrangement between the borrower and the lender wherein they utilize one or more strategies to make the payments more affordable over the long term.  The focus of this buy down is to have a lower interest rate that applies to the total amount loaned.  Moreover, the process may require a larger initial payment from the debtor, depending on the terms of the loan agreement.  The buy down may be in a specified period of time during the life of the mortgage (temporary buy down) or for the entire life of the mortgage (financed permanent buy down).
The temporary buy down is a tool for borrowers purchasing a home that may not have enough income to qualify.  To use a temporary buy down, the borrower must have an access to extra cash.  The cash funds are in an escrow account from which the payments that supplement the borrower’s payments are drawn.  While the borrower’s payments are reduced in the early years, the payments received by the lender are the same as they have been without the buy down.  The short falls from the borrower are offset by withdrawals from the escrow account.  This is not a type of mortgage.  This is an option that can be attached to any type of mortgage loan.  Most temporary buy downs are attached to Fixed Rate Mortgages.
 The Financed Permanent Buy down Mortgage can lower the borrowers’ monthly payments without requiring additional cash at closing.  With this offering, the borrowers can permanently reduce their interest rate by financing up to three discount points into the loan amount for fixed-rate mortgages.  Moreover, the borrower can also reduce their interest rates on the 5/6-month, 7/6-month, 10/6-month, 5/1, 7/1 and 10/1 Adjustable Rate Mortgages.  By financing the discount points up front, the interest rate can be up to 75 basis points lower than the prevailing market rates.
Combining a Financed Permanent Buy down Mortgage with other flexible Freddie Mac or Fannie Mae mortgage products, the borrowers can qualify for a larger mortgage amount.  This may be also an exceptional option to refinance from high interest rate loans to below the market interest rates.  Moreover, Financed Permanent Buy down Mortgages can help borrowers lower their monthly payments and obtain a lower interest rate while increasing purchasing power.

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