3-2-1 Buydown

HELP BORROWERS LOWER THEIR INTEREST RATE BY UP TO 3% AT THE START OF THEIR LOAN

Give your clients extra flexibility with a lower monthly payment by offering them a Temporary Rate Buydown to lower their interest rate at the start of their loan. It’s a great option for almost any borrower, especially those who:

• Expect an increase in their income in the next few years
• Have excess seller concessions to use and want to take advantage of a low fixed rate
• Are looking to do renovations, make upgrades, or buy furniture for their new home
• Are going from renting to buying and want to ease into their mortgage with a lower payment

Temporary Rate Buydowns are available for:

• Conventional primary and second home purchases
• FHA and VA primary home purchases
• Prime Jumbo 30-year fixed primary and second home purchases

Choose between these seller- or lender-paid 1-, 2- and 3-year Temporary Rate Buydown options:

• 3-2-1 buydown: A buydown of 3% in the first year, 2% in the second year, 1% in the third year, then back to the original locked rate in the fourth year for the duration of the term.
• 2-1 buydown: A buydown of 2% in the first year and 1% in the second year, then back to the original locked rate in the third year for the duration of the term.
• 1-1 buydown: A buydown of 1% in the first two years, then back to the original locked rate in the third year for the duration of the term. 
• 1-0 buydown: A buydown of 1% in the first year, then back to the original locked rate in the second year for the duration of the term.

Here’s an example of the potential savings on a 3-2-1 seller-paid buydown:

Conventional 30-Year Fixed 3-2-1 Temporary rate Buydown on a $350,000 loan for a borrower with a 700 FICO and a 90% LTV
3-2-1 Temporary Rate Buydown	Interest Rate	Monthly Payment*	Monthly Savings	Yearly Savings
Year 1	3.75%	$1,620.90	$649.19	$7,790.28
Year 2	4.75%	$1,825.77	$444.32	$5,331.84
Years 3	5.75%	$2,042.50	$227.59	$2,731.08
Years 4-30	6.75%	$2,270.09	–	–
				$15,853.20

 

^{*The principal and interest payment on a $350,000 30-year Fixed-Rate Loan at 6.750% and 90% loan-to-value (LTV) is $2,270.09. The Annual Percentage Rate (APR) is 7.138% with estimated finance charges of $5,600. The principal and interest payments, which will continue for 360 months until paid in full, do not include taxes and home insurance premium, which will result in a higher actual monthly payment. Rates current as of 11/16/22. Subject to borrower approval. Some exclusions may apply.}

Prime Jumbo 30 Year Fixed 2-1 Temporary rate Buydown on a $1,200,000 loan for a borrower with a 700 FICO and 80% LTV
2-1 Temporary Rate Buydown	Interest Rate	Monthly Payment*	Monthly Savings	Yearly Savings
Year 1	4.750%	$6,259.77	$1,523.41	$18,280.92
Year 2	5.750%	$7,002.87	$780.31	$9,363.72
Years 3-30	6.750%	$7,783.18	–	–
				$27,644.64

 

^{*The principal and interest payment on a $1,200,000 30-year Fixed-Rate Loan at 6.750% and 80% loan-to-value (LTV) is $7,783.18. The Annual Percentage Rate (APR) is 6.848% with estimated finance charges of $12,000. The principal and interest payments, which will continue for 360 months until paid in full, do not include taxes and home insurance premium, which will result in a higher actual monthly payment. Rates current as of 12/20/22. Subject to borrower approval. Some exclusions may apply.}

• The borrower must qualify for the full monthly payment (before the buydown rate is applied)
• For the seller-paid option, seller concessions are deposited as a lump sum into a buydown account. A portion of this sum is released each month to reduce the borrower’s monthly payments.