Seller buydowns are key in today’s market
A loan officer or Realtor who has an excellent knowledge of how to use interest rate buydowns will be able to answer many buyer- and seller-related questions.
When a buyer says, “I’d love to buy that condominium, but the payment or interest rate is too high,” a loan officer should be able to say “What payment or interest rate would you like? I’ll try to get you there.” Having the buyer look at lower-priced condos with fewer amenities is rarely a sufficient answer. An understanding of how buydowns lower the interest rate and the mortgage payment can help all parties involved.
The buyer should be aware that when an offer is made on a property, the buyer can ask for a seller concession. Depending on the type of loan the buyer is seeking, an interested party can contribute up to nine percent. This concession can be used to permanently buy down the interest rate without lowering the purchase price. This buydown also helps the buyer to qualify with the lower interest rate.
The seller buydown has SEVEN times the leverage and impact as a price reduction.
The seller-paid buydown is not anything new. However, at Cherry Creek Mortgage Company the way we market during this real estate cycle is unique. Call today for detailed information including specific examples.
With a full shift from a seller's market to a buyers market, both sellers and buyers need to reevaluate the best approach to a transacation. The examples below illustrate how a simple seller credit towards the buyer's interest rate can produce significant monthly savings to the buyer.
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A Sample Purchase That Could Potentially Save $1,679.52 Per Year
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Listing Price
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Price Reduction
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Seller Buydown
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Sales Price
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$349,000
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$335,040
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$349,000
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Down Payment
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10%
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10%
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10%
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Loan Amount
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$314,100
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$301,536
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$314,100
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Program
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30 Year Fixed
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30 Year Fixed
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30 Year Fixed
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Rate/ARP
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4.875/5.002
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4.875/5.000
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4.125.4.252
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Term
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Amortized
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Amortized
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Amortized
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Payment
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$2,565.74
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$2,499.25
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$2,425.78
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Income to Qualify
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$
102,629.60
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99,970.00
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$97,031.20
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Monthly Savings
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$66.49
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$139.96
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In this example we used 4.00 in discount points of $13,960 to buy down the interest rate resulting in a savings of $139.96 per month. Also, the points are a tax deduction in the year the property is purchased for the buyer. Please contact your accountant for specific details. Rates are subject to change and this is not a offer to extend credit as defined by Regulation Z.
IL License #MB.0005759-013
By Reid L. Doner
Cherry Creek Mortgage Company, Inc
Direct: 630-554-0070x110
Emai: rdoner@ccmclending.com
Web: www.cherrycreekmortgage.com
The preceding article is provided as a complimentary service to OwnACondo.com for general informational purposes only. It is not intended to provide a comprehensive guide to the subject discussed. The descriptions, terms and definitions contained within are solely the responsibility of the author. Contributors to this regular feature include various Chicago-area mortgage lenders. No legal suggestions or financial guidance are intended, nor should they be implied. Be sure to contact a mortgage lending professional of your choice, as well as an acountant, for more information and/or to discuss details of your specific situation.
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