Buying a house is a big investment. If you're looking for a way to ease into your new mortgage, a Buydown Loan may be something to consider (New American Funding)
Buying a house is a significant investment, especially if you need to make repairs or want to tackle a home improvement project upon moving in.
If you’re looking for a way to ease into your new mortgage and have a little more flexibility in payments at the start, consider a Buydown Loan from New American Funding. This program offers loans with a reduced payment rate for the first year (or even the first two to three years) of your mortgage — all at no additional cost to you.
What Is A Buydown Loan?
A mortgage rate buydown, more commonly referred to as a buydown mortgage, is a financing option that gives borrowers a low rate for a specific period, whether a few years or for the life of the loan. The buyer typically pays mortgage points (upfront fees calculated as a percentage of the loan amount) at closing, which covers the difference between the standard and lowered rates.
Buydown rates help new home buyers settle in and create a future of financial success. Potential borrowers can reduce first-year, second-year and third-year payment rates on a 30-year or 15-year fixed-rate mortgage. Buyers don’t pay any additional costs to lower the payment rate for the buydown period. A buydown mortgage can be negotiated from lender to lender, but structures will vary based on a temporary or permanent buydown rate.
There are two common types of buydown rates:
Temporary payment rate — A temporary payment rate buydown begins with a lower rate and increases over time. Borrowers can select a plan with a rate of up to 3 percent lower than the current mortgage rates for the first year. The rate will then increase each year by 1 percent on average until the loan reaches about three years, where the rate returns to the original market rate and remains until the loan is paid off.
Permanent mortgage rate — With a permanent mortgage rate buydown, you purchase a lower rate for the entire loan term. Lenders can offer a lower rate by charging discount points — the more discounts you pay, the more the mortgage is reduced. The loan rate will never increase unless you take out an adjustable mortgage.
How Does New American Funding’s Buydown Mortgage Work?
The Buydown Loan from New American Funding is for people looking to buy a house or refinance their mortgage who want to free up funds for other purposes, such as minor home repairs or improvements. There are four buydown plans to choose from:
A 1-0 Buydown reduces the payment rate by one percent for the first year on a new loan.
A 3-2-1 Buydown has a lower payment rate for the first three years of the loan. The first year is three percent lower than the note rate, the second year is two percent lower than the note rate, and the third is one percent lower than the note rate on a new loan.
A 2-1 Buydown reduces the payment rate by two percent for the first year, followed by a reduced payment rate of one percent for the second year on a new loan.
A 1-1-1 Buydown reduces the payment rate by one percent for the first three years on a new loan.
Each loan option offers a lower payment rate during the buydown period compared to the following years of loan payments. Lowering the payment rates during a buydown period comes at no cost to the buyer or borrower. Choosing any of the above will allow the buyer to save money each month, purchase upgrades and home improvements, ease into their mortgage payments and experience more affordable mortgage payments before the buydown payment rate expires.
These loans are available as Conventional, Federal Housing Administration and U.S. Department of Veterans Affairs loans and maybe for a primary or secondary home (depending on the loan program). Adjustable-rate mortgages may also be available in certain circumstances.
You can contact a New American Funding loan officer to help you determine if this loan program is right for you and if you meet the eligibility requirements.
How A Buydown Loan Can Help Fund New Home Repairs
A lower upfront payment will free up funds to tackle the home repairs you want to complete before moving in. It might be challenging to decide where to begin, so here are some of the high-priority home improvement upgrades and projects homeowners should address before unpacking the boxes.
Flooring replacement or refinishing — Don’t fill rooms with clutter, boxes or anything else before considering flooring replacements or refinishing.
Major system repairs and replacement — If you're purchasing an older home, the HVAC system, electrical wires or water heater might need to be updated.
Whole-room renovations — Renovating the entire kitchen or bathroom can be costly and time-consuming. You won't be able to use the space as you once did — no meals will be cooked in the kitchen and running water might not be available.
Safety improvements — New homeowners should immediately switch out locks on doors or codes set by previous owners or install home security elements if desired.
Exterior improvements and repairs — Roofing and siding are essential to keeping a home in top shape. Installing a new roof or siding are more extensive projects that take time to complete, but they are crucial if the house has structural issues that need to be addressed.
New American Funding: Making The Dream Of Homeownership A Reality
New American Funding offers a variety of options to make it easier for people to get into their dream homes faster. More homes are available to purchase now than in the last several months. New American Funding is working with homebuyers on getting lower rates from now until March 31, 2028.
In 2022, New American Funding was recognized as #1 in customer satisfaction among mortgage servicers by the J.D. Power 2022 U.S. Mortgage Servicer Satisfaction Study. The company was able to achieve this prestigious recognition through its dedication to helping every client from every background achieve homeownership.
Contact a loan officer on the mortgage team at New American Funding to request a quote or to learn more about the Buydown Loan and how it might benefit you and your finances, as well as more about buying points if you’re interested.
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