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.
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.