A GOOD TIME TO BUY

Now is a good time to buy.  There are a lot of homes for sale.   Sellers are offering price reductions, concessions towards closing costs, and rate buydowns.  The temporary rate buydown is popular. 

There are three different types of temporary buydowns, 3/2/1, 2/1, and 1/0.   For instance, in a 3/2/1 buydown the interest rate is reduced in the first year of the mortgage by 3%, by 2% in the second year, and 1% in the third year.  So, if today’s 30-year fixed rate is 6.75%, the rate in the first year would be 3.75%, then 4.75% in the 2nd year, 5.75% in the third year, and at the note rate of 6.75% for the remaining life of the loan.  The buydown is paid by the seller.  The cost is the total difference in payments during the buydown period.  In the above example, this would be the difference in monthly payments between 3.75% and 6.75% for the first year, plus the difference in monthly payments between 4.75% and 6.75% for the second year, plus the difference in monthly payments between 5.75% and 6.75% for the third year.  The 2/1 and 1/0 buydowns work in the same way.  If rates come down, you can refinance anytime during the buydown period.  

Many buyers today are hesitant to buy due to higher interest rates.  However, if they wait for rates to come down, they could face more competition as there could be more buyers in the marketplace, resulting in multiple offers on homes which could increase prices.  The temporary buydown gives the buyer a chance at a lower rate today, without waiting for rates to come down.  

Temporary buydowns are available for refinances, too.  If you are considering purchasing a home, or refinancing, contact us and we can help you.