Illustrative Example
Suppose the underlying note rate is 6.5%.
For illustration:
- Year 1 payment may be calculated using 4.5%
- Year 2 using 5.5%
- Year 3 onward using 6.5%
This example does NOT represent a current offered rate.
YOU GENERALLY NEED TO QUALIFY BASED ON THE ACTUAL LOAN REQUIREMENTS
The most important rule: you generally need to qualify based on the actual loan requirements, not simply the artificially lower first-year payment.
Do not assume the buydown lets you qualify for a house you otherwise cannot afford.
Why Buyers Like It
The first years of ownership can be expensive.
Buyers may be paying for furniture, moving, landscaping, repairs and new household expenses.
A temporary lower payment can ease that transition.
The Risk
Year three arrives. The subsidy ends.
Do not rely on "I'll refinance before then." Rates might not cooperate.
Buy the home assuming you can handle the eventual payment.
Seller Strategy
A seller concession funding a temporary buydown can sometimes attract buyers more effectively than a modest price reduction.
If buyers are resisting your home's monthly payment, Lisa can evaluate whether a seller-funded financing incentive could be more effective than another price cut.
