Temporary Rate Buydown: Everything You Need to Know

St. Louis, MO – October 17th, 2023- 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 first three or two years of the loan. 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 are applicable 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 undiscounted 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). These upfront costs are typically paid for by the seller or the home builder 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 you are ready to buy. Gershman Mortgage staffs only the best and brightest loan officers in the game and they will 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 you are ready, contact a Gershman Mortgage Loan Officer to start your journey home today.

 

About Gershman: Communities, families, and homes are at the heart of what we do at Gershman Mortgage. Our founding principles are based on the core values of honesty, integrity, the entrepreneurial spirit, and putting our customers first. We are passionate and committed to customer service and strive to ensure that we exceed the expectations of our customers. We are a customer-centric company devoted to creating and maintaining long-lasting relationships.

NMLS #138063 16253 Swingley Ridge Road Suite 200 Chesterfield, MO 63017 (800) 457-2357 Equal Housing Lender.