Buy-Down Mortgages
Similar to a
Graduated Payment Mortgage, a Buy-Down Mortgage Loan starts off with an
initially discounted interest rate that gradually increases to an agreed upon
fixed rate within the first few years.
To qualify for a Buy-Down Loan, the borrower will
typically ‘buy’ the initial lower interest rate by paying a lump sum up front
to the lender. Often times this lump sum may come as a gift to someone that is
buying a home for the first time and may be used to qualify a borrower who
would otherwise not qualify for the loan.
The
initial lower interest rate allows home buyers to qualify for a better house
with the same amount of net income and the lower initial payments allows you
to use the extra money for necessary household items such as furniture, home
improvements, or other ‘new home’ purchases that often get overlooked when
budgeting.
Be sure to read our other mortgage advice articles:
Fixed Rate Loans
Adjustable Rate Loans
VA Loans
FHA Loans
Balloon Loans
Convertible Mortgage Loans
Negative Amortization Loans
Graduated Payment Mortgages
Buy-Down Mortgage
Jumbo Loans
2nd Mortgage Loans
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