Last week, I wrote a post about buy down loan programs. What they are and how these buy down loan programs can be advantageous for both Pasadena home sellers and Pasadena home buyers.
Today, I wanted to give you an idea of the types of temporary buy down loan programs available.
One of the most common forms of buy down in use today is the 3-2-1 interest rate buy down. This is a temporary buy down, which would reduce the buyers overall interest rate by 3% in year 1, 2% in year 2 and 1 % in year 3.
For example, this buy down can reduce the buyers payments by up to $200 per month in the first year, $100 per month in the second year and $50 per month in the third year. The $200 per month reduction in payments is equivalent to giving the buyer an $800 raise in income for loan qualification purposes.
It will increase the effective income ratio from 28% to approximately 38% for the buyer. Probably more importantly, it gives the buyer time to build up to the higher payments.
The cost to the Pasadena home seller to provide the 3-2-1 interest rate buy down is approximately 5% of the sale price. Since many Pasadena sellers are willing to drop their prices by 5% or more to make the sale, this buy down is within the sellers capabilities.
The advantage is the Pasadena buyer will purchase the sellers house at 4% interest instead of 7% during the first year, giving the Pasadena seller a greater competitive advantage, while giving the buyer a greater perceived purchase value!
Read Also: Buy Down Loan Programs help Close the Deal
If I can be of any assistance with your Pasadena Real Estate needs, please do not hesitate to email me or call me at (626)629-8439. Thank you!
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Thinking of selling your home? Interested in finding out the current market value of your single family home, condo or investment property? Then call Irina Netchaev at (626) 629-8439 to discuss what is happening in today’s Southern California Real Estate Market.