2-1 or 1-0 Temporary Buydown

What is a Temporary Buydown?

A temporary buydown enables a portion of the borrower’s monthly Principal and Interest payment to be subsidized with a Seller credit and decrease their monthly payment for the first two or one year. The temporarily decreased payment allows borrower to free up cash-flow for moving expenses and or other transitional expenses.

If 2/1 buydown, Borrower payments for the first year are based on Note Rate minus 2%; payments for the second year are based on Note Rate minus 1%; all other payments are fully amortized at the Note Rate starting on the 3rd year.

If 1/0 Buydown, Borrower payments for the first year are based on the Note Rate minus 1%; all other payments are fully amortized at the Note Rate starting on the 2nd year.

The purchase agreement must reflect the total amount of the seller credits and that the seller’s concession can be applied toward a Temporary Interest Rate Buydown and additional closing costs. That percentage or dollar amount must be enough to cover the temporary buydown subsidy and the amount counts as interested third-party contributions. Any excess Seller credits may be used toward closing costs.

The Seller and Borrower must sign a Buydown Agreement at the time of loan submission and a final agreement will be signed at closing.

Program Highlights

Benefits to Borrower(s):

  • Borrowers have more financial flexibility during the first two or one year in a new mortgage

Benefits to your client and Real Estate Partner:

  • Assist real estate agents and seller by providing an additional negotiation option and may allow more offers to be accepted

Eligibility Overview

  • Seller Paid Temporary Buydown only
  • Minimum FICO of 620
  • Primary Residence Purchase only:
    • 1-2 Unit site built*
    • Modular
    • PUDs
    • Condos
  • 1 Unit Second home*
  • Manufactured Homes (Single and Multi-width) are not Eligible with exception to FNMA Standard and HomeReady
  • Fixed rate 30-year
  • Qualify at the Note rate
  • Available in combination with the following Conventional programs:
    • FNMA Standard
      • HomeReady (Second Homes not permitted)
    • FHLMC Standard
      • Home Possible (Second Homes not permitted)
      • HomeOne (One-Unit primary residences only, Supper Conforming not permitted)
  • Standard Government Program Eligibility:
    • FHA 203(b), VA and USDA (Primary residence: 1-Unit Site Built, Modular, Condos and PUD)

*May not be applicable on all programs. Refer to program guidelines for restrictions.

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