TEMPORARY BUYDOWN

TEMPORARY BUYDOWN

A 2-1 buydown and a 1-0 buydown are both temporary interest rate buydown programs often used in the mortgage industry to help borrowers afford a mortgage loan by lowering their initial monthly payments. Here's how they work:

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2-1 Buydown

With a 2-1 buydown, the interest rate on the mortgage loan is reduced by 2% in the first year, 1% in the second year, and then returns to the original interest rate for the remaining term of the loan. This means that for the first year, the borrower pays a lower interest rate, which gradually increases over the next two years. 

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First-Time Homebuyer
Interest Rates
Hard To Qualify For
Buying A Modest Home
Super High Loan Minimum

First-Time Homebuyer

Risk Factor

You cannot get a jumbo loan as a first-time homebuyer.

Solution

But this is not the case. Even if you are buying your first home, you can apply for a jumbo loan. And you may be successful depending on your credentials.

Interest Rates

Risk Factor

You will pay a higher interest rate on a jumbo loan.

Solution

DSCR loan interest rates are comparable to conforming loans.

Hard To Qualify For

Risk Factor

Jumbo loans are hard to qualify for.

Solution

Jumbo loans are a bit more difficult to qualify for but not by very much as a credit score of 720 is fairly easy to achieve.

Buying A Modest Home

Risk Factor

You do not need a jumbo loan if you are not buying a mansion.

Solution

It is not uncommon for regular homes to require more financing to buy than you can obtain through the use of a conforming mortgage.

Super High Loan Minimum

Risk Factor

Jumbo loans require a super high loan minimum.

Solution

Jumbo loans don’t start at $1 million dollars. Instead, the minimum amount for a jumbo loan is anything above the conforming loan limit of $647,200.

1-0 Buydown

With a 1-0 buydown, the interest rate on the mortgage loan is reduced by 1% in the first year and then returns to the original interest rate for the remaining term of the loan. This means that for the first year, the borrower pays a lower interest rate, which then becomes the regular rate for the rest of the loan term. 

In both cases, the lower initial interest rate results in lower monthly mortgage payments during the buydown period. Borrowers might choose these buydown options if they expect their income to increase in the future or if they want to allocate more funds to other expenses in the short term. 

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Bentonville, AR 72712

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