A 2-1 buy down can lower the rate by 2 in the first year and 1 in the second year, often entirely through seller concessions. The best play in today's market is a 2-1 buy down.
With rates being higher than ever, attempt buy-down is a smart strategy when buying a home. These are advantageous when sellers are also okay providing the credit to fund it.
On a $400,000 loan at 6.25% a 2-on buydown will save roughly $8,000 in the first year and $4,000 in the second year. That's a combined $12,000 savings back in your pocket during one of the highest interest periods that we've seen.
A lot of buy downs are funded by seller concessions. The money that comes from the seller instead of putting to your closing costs will be put into a buy down escrow account. In today's buyer markets, Texas sellers are often willing to fund buy downs to attract more offers.
If rates drop during the buydown period, you can always refinance into a lower rate before the full one kicks in. This is a good way of timing the market and any money left in your buydown escrow account goes back to you.
Qualify at the full normal monthly payment but enjoy the lower payments in the first two years. This is perfect for the buyers that expect income growth while trying to save money.
See the year-over-year savings on a real-world example.
Your real estate agent will negotiate the seller concessions in the purchase contract. In today's Texas market sellers will commonly give anywhere from 3% to 4% of concessions making it enough to fully fund a 2/1 buydown or a 1/0 buydown at minimum.
South Texas lending looks at your exact buydown savings: year-over-year payment schedule, total cost, and comparison to permanent point buydowns.
The temporary buydown funds are placed into an escrow account at closing. Your monthly payments will automatically reduce in the first and the second year with anything needed from you.
If the Texas mortgage interest rates fall below your permanent rate during this buydown period, you can refinance into a lower rate at any time. The remaining funds in this buydown escrow are automatically applied to the payoff.
Common questions about temporary buydown mortgages in Texas.