Marquee Madness: Temporary Buydowns

Interest rates are super volatile right now.
The intraday swings we are seeing are some of the highest I’ve ever seen.

After all the volatility, interest rates are very similar to last week.
Well qualified clients will usually qualify for a rate in the high 6%’s to low 7%’s depending on cost considerations and scenario.

A 2/1 Buydown typically requires about a 2% to 2.2% concession.
If you are able to negotiate a higher concession above this, we can use the higher amount to convert monthly mortgage insurance to upfront mortgage insurance. Upfront mortgage insurance is an upfront fee to pay for the MI versus a monthly fee. The seller concession can cover this premium. Seller concessions can also cover appraisal fees, title fees, prepaids, etc.

So just because you only need a 2 to 2.2% concessions to cover a 2/1 buydown, doesn’t mean you can’t negotiate higher concessions that we can use with the 2/1 buydown to provide additional benefits to a client.

Here again are the max concessions on the most common products we see.
If you have any questions regarding the math and truly understanding temporary rate buydowns – please give me a call.

The full concession in dollars is exactly what the customer saves in the first 2 years in payments. So if the concession is $10,000 to get a 2/1 buydown – the customer saves $10,000
on their payments in the first 2 years.
Powerful stuff.

Experts expect fixed rate mortgages to drop sometime in 2023. If this happens, we can refinance these fires into a lower 30-year-fixed rate for closing costs. The temporary buydown is the best bet if rates drop next year.

We also believe that there is pent up demand where many people that would buy homes are not buying due to interest rates. These clients still want to buy.

If rates drop as expected, many of these buyers sitting on the sideline will come into the market. The housing marketing will be very competitive again and a client won’t have the pick of available homes that they have today.

The MBA (Mortgage Banker’s Association) data shows that if Quarter 4 ends with similar sales to the first 3 quarters, 2022 will be the 2nd highest mortgage purchase volume origination year ever! And they predict 2023 to be higher than 2022.

The media often portrays the market as something very different than it is. Is the market in 2022 as hot as 2021 – no.  But we are also not in the dire straights that many headlines suggest.

One really important statistic is the listing success rate. The listing success rate just dropped below 66% – meaning 1 out of 3 listings doesn’t sell.

If you are selling your home, you need to get with an expert agent that knows how to price and market your home. Don’t trip on pennies to pick up dollars. Just because your brother’s friend’s friend is a Realtor doesn’t mean you should use them to sell your home.