Buy down Options for Colorado borrowers
Are you looking for one
of the best options out there for buying a home with a buy down
option in Colorado? if so than call us 855-529-5222
The most common buy down here in Colorado is the 2-1 buy down.
In the past, for a borrower to secure a 2-1 buy down. they would
pay 3 points above current market points in order to pay a below
market interest rate during the first two years of the loan. At
the end of the two years they would then pay the old market rate
for the remaining term. Sometimes this is a good option in soft
markets but you need to go over all the options with your loan
As an example, if the current market rate for a conforming fixed
rate loan is 5.5% at a cost of 1.5 points, the buy down. gives
the borrower a first year rate of 4.50%, a second year rate of
6.50% and a third through 30th year rate of 7.50% and the cost
would be 4.5 points. Buy down. were usually paid for by a transferring
company because of the high points associated with them.
In today's market, colorado mortgage companies have designed
variations of the old buy downs rather than charge higher points
to the buyer in the beginning they increase the note rate to cover
their yields in the later years, Colorado lenders have seen a
dramatic increase in these types of loans as they really are an
attractive option for borrowers.
As an example, if the current rate for a conforming fixed rate
loan is 8.50% at a cost of 1.5 points, the buy down. would give
the buyer a first year rate of 7.25%, a second year rate of 8.25%
and a third through 30th year rate of 9.25% , or a three-quarter
point higher note rate than the current market and the cost would
remain at 1.5 points.
Another common buy down. is the Colorado 3-2-1 buy down. which
works much in the same ways as the 2-1 buy down., with the exception
of the starting interest rate being 3% below the note rate. Another
variation is the flex-fixed buy down. programs that increase at
six month interval rather than annual intervals.
As an example, for a flex-fixed jumbo buy down. at a cost of
1.5 points, the first six months rate would be 7.50%, the second
six months the rate would be 8.00%, the next six months rate would
be 8.50%, the next six months rate would be 9.00%, the next six
months the rate would be 9.50% and at the 37th month the rate
would reach the note rate of 9.875% and would remain there for
the remainder of the term. A comparable jumbo 30 year fixed at
1.5 points would be 8.875%. If you are still confused about the
buy downs please give us a call 855-529-5222 and we would be ahppy to go over all the
options with you.