In today’s market, it’s easy to feel discouraged looking at home prices that leave you wondering how you’ll ever be able to afford a home. Rest assured, Gershman Mortgage has your back with our Temporary Rate Buydown Loan Program, which allows you to enjoy reduced payments while settling into a new mortgage.
You may be wondering what a temporary rate buydown is, so let us answer a few common questions about the program!
Q: What is a temporary rate buydown?
A: A temporary rate buydown is a mortgage loan option in which the seller, builder, or borrower buys down the interest rate of the loan’s first three or two years. Gershman Mortgage proudly offers 1-1 temporary rate buydowns for FHA, VA, Conventional, and USDA Loans, 2-1 temporary rate buydowns for FHA, VA, Conventional, and USDA Loans, and 3-2-1 temporary rate buydowns for FHA, VA, and Conventional loans too, all of which apply to primary and secondary homes.
Take a look at a 2-1 buydown example:
In year one, the interest rate is 2% less than the original locked rate. In year two, the interest rate is 1% less. In years 3-30, the interest rate is the original locked fixed rate.
Q: What is the qualification process for a temporary rate buydown program?
A: During the temporary buydown period, the borrower does have to have a lower effective rate; however, for qualification purposes, the borrower must qualify at the non-discounted note rate.
Q: Can borrowers make extra payments to offset future rate increases?
A: No, they cannot.
Q: Are there any additional costs associated with a temporary rate buydown program?
A: There is no additional fee to use the temporary rate buydown program. However, the funds that are subsidizing the temporary lower monthly payments are collected upfront at closing and put into an escrow account (Essentially, the interest for the buydown period is being prepaid). The seller or the home builder typically pays for these upfront costs at closing in the form of a concession.
If you’re interested in purchasing a home, it may be a good idea to sit down with a knowledgeable loan officer before buying. Andy Schoemehl and his team can help you make the best decision for you and your family. Especially when it comes to down payments, they can help you determine a price range that fits your budget and how much you’ll need.
When ready, contact Andy at 314-221-7797 to start your journey home today.