Specializing in Grosse Pointe, St. Clair Shores
Harrison and Chesterfield Twp, Harper Woods
When buyers come in to apply for loans, they want to get the best deal on a home with the lowest possible monthly payment. Well, if that's you, here is a possible solution to meet your needs. It is called a buy down.
A buy down is money advanced by an individual (i.e. a builder, seller) to reduce the monthly payment on a home mortgage. It allows the rate to be bought down by pre-paying the interest for a designated amount of time and could be in effect for a number of years.
What are the benefits you might ask? First, lower starting monthly payments for the buyer. Payments increase slightly each year, allowing the buyer to adjust slowly to their full mortgage payment. This gives the buyer the security of knowing monthly payment amounts for each year in advance. Second, the funds can come from several sources i.e. builder, seller, relative, employer or lender without having too much effect on concessions that may be needed for the closing costs.
There are three types of buy downs: 1-0, 1% for the first year of the loan, 2-1, 2% for the first year and 1% for the second and 3-2-1, 3% for the first year, 2% for the second and 1% for the third. What does this all mean? Here is an example on a loan amount of $200,000. Payment at 5.75% (note rate) = $1,168, Payment at 4.75% (bought down rate) $1,044.
For more on our buy down program or other creative mortgage options, call me and let's get started finding the best program to meet your needs.