Are you qualified to buy a house this year, but your projected monthly payment is not where you want it to be? Don’t throw in the towel just yet!
It may be time to consider a 2-1 Buydown.
The 2-1 Buydown programs lowers the interest rate 2% for the first year and then 1% for the second year of your loan. The third and every year after has the regular payment.
This program is perfect for buyers who have the means to purchase but want a more affordable monthly payments in light of recent high interest rates. A 2-1 Buydown is available for all qualified home buyers and can be used in conjunction with other government programs, such as the First-Time Home Buyers Program.
Here is what the payments could look like using the 2-1 Buydown:
This program does come at a cost. For the example above with a $459,000 purchase price the cost would be about $7,332.
What sometimes works out nice is negotiating for the seller to pay this cost for you.
Back in covid times it was extremely rare for a seller to pay closing costs, but with where we are at in the market today, we are seeing it happen more and more. Sellers would rather pay a buyer’s closing costs than have to drop their listing price by $20,000.
With the 2-1 Buydown you can enjoy a lower payment for two years. But the goal is to ultimately refinance into lower rate before the regular payment takes effect. If the market cooperates and you are able to refinance, then you will have a lower payment today and a lower payment in the future.
If the opportunity to refinance doesn’t present itself, you have two years to prepare for the higher payment and a lot can happen in that time such as a job promotion or higher income.
If you are interested in seeing if the seller can pay for a 2-1 Buydown for you and what the payments would be, please reach out and we can run some numbers for you.