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 858-234-9116

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 consultant.

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 858-234-9116and we would be ahppy to go over all the options with you.