Temporary Buydowns: Your Ticket to Cooler Mortgage Rates
September 9, 2023
Temporary Buydowns: Your Ticket to Cooler Mortgage Rates
Hey there, future homeowners! We get it – diving into the world of mortgages can feel like a plunge into the deep end of the pool, especially when you're just starting out. But don't sweat it! At DNVR Lending, we've got something up our sleeves that'll make those initial years of homeownership a bit more chill – temporary buydowns. In this blog post, we're going to kick back, relax, and break down the nitty-gritty of temporary buydowns, how they roll, and what's cookin' in our buydown menu.
Getting the Lowdown on Temporary Buydowns
Temporary buydowns? Sounds fancy, right? Well, they're like that friend who spots you when your wallet's feeling a bit light. Essentially, it's a way to temporarily lower your interest rate for the first few years of your mortgage.
Think about it – it's like getting a discount on your mortgage interest rate upfront, making those monthly payments way easier on the wallet, especially when you're just settling into your new digs.
Let the Seller Handle It
Now, here's the kicker: we're all about seller-paid buydowns. What does that mean for you? Well, the seller takes the reins and covers the difference between your regular monthly payment and the sweet reduced rate. No need to front the cash, which can be a game-changer when you're gearing up for homeownership.
But hold on, if you're the type who likes to go all-in from the get-go, you can also explore another option – purchasing "points." These little gems let you pay a bit more upfront in exchange for a lower interest rate. It's like having the option to trade up for a more comfortable mortgage experience – your call!
Breaking Down the Mechanics
Let's get into the nitty-gritty of how this all works. Buydown funds are initially stashed away in an escrow account. Then, each month, a slice of these funds is released, allowing us to temporarily dial down your interest rate and, naturally, your monthly mortgage payments. IF you refinance or sell before the entire escrow balance is used, the remainder is applied towards your loan payoff. Which means, you won’t lose any of the unused credit down the road should you refinance or sell. Right on!
Now, let's talk options – we've got three on the menu for eligible borrowers:
3-2-1 Buydown:
This one's like a three-course meal for your mortgage. Start with a 3% reduction in the note rate during the first year, followed by 2% in the second year, and 1% in the third year. From year four and onwards, it's the regular rate doing its thing. Keep in mind, though, that this buydown is available exclusively for conventional loans.
2-1 Buydown:
For those who like things a bit simpler, we've got the 2-1 buydown. Kick off with a 2% reduction in the note rate for the first year, followed by 1% in the second year. After that, it's business as usual, with the regular rate taking over from the third year and beyond.
1-0 Buydown:
This one's a smooth ride. You'll enjoy a 1% reduction in the note rate for the first year, and then, from year two all the way to year thirty, the regular rate takes the wheel.
But hey, remember, even though we're offering you this rad deal, you still have to meet the qualification criteria based on the final note rate. We want to make sure that your mortgage groove matches your financial moves.
So, if you're ready to make homeownership feel a bit more like a beach vacation and a little less like a business trip, check out our temporary buydown options at DNVR Lending. We're here to help you ride the mortgage waves and find the perfect fit for your chilled-out homeownership journey.
DNVR Lending Blog
The start of a new year naturally puts people into planning mode. Health goals. Career goals. Financial goals. But one area that often gets overlooked in January? Your mortgage strategy. At DNVR Lending, we see it every year. Borrowers who take time early in the year to review and prepare, without immediate pressure to buy or refinance, are the ones who move through the market with the most confidence later on. Here’s why January is one of the smartest times to review your mortgage plan. 1. Strategy Beats Speed—Especially Early in the Year January tends to be quieter in the housing market compared to the spring and summer rush. That slower pace creates something incredibly valuable: space to think clearly instead of reacting quickly. Instead of rushing into decisions when competition heats up, January allows you to: Review your long-term goals Understand your true buying power Explore different loan structures Identify areas to strengthen before making a move When the right opportunity appears later in the year, you’re prepared, not scrambling. 2. Your Mortgage Is More Than Just a Rate Many borrowers focus solely on interest rates, but a smart mortgage strategy involves much more than that. A strong plan also considers: Loan structure and term length Down payment options Available assistance programs or incentives Cash flow and long-term financial impact Timing based on your life and career goals January is an ideal time to look at these pieces together, without the pressure of an active transaction driving the conversation. 3. Financial Clarity Sets the Tone for the Year The beginning of the year is when many people take a closer look at income, expenses, savings, and debt. Reviewing your mortgage strategy alongside those financial check-ins helps everything align. Even if buying is a year or two away, understanding where you stand now can help you: Adjust savings strategies Improve credit positioning Set realistic price expectations Avoid surprises down the road Clarity early in the year often leads to better outcomes later. 4. Planning Early Creates Better Options Later Waiting until you “have to” think about a mortgage can limit your choices. Planning early expands them. When you review your mortgage strategy in January, you gain: More flexibility in timing More confidence in decision-making More control over your financial path It’s the difference between reacting to the market and navigating it intentionally. 5. You Don’t Need to Be Buying to Start the Conversation One of the biggest misconceptions about mortgage planning is that it only matters when you’re actively buying or refinancing. In reality, some of the most valuable conversations happen well before that point. January is simply a smart time to: Ask questions Review different scenarios Build a roadmap that fits your life, not just the market A Smarter Way to Start the Year A new year doesn’t require immediate action, but it does reward thoughtful preparation. Whether buying a home is months away or still just an idea, reviewing your mortgage strategy now puts you in a stronger position when the timing is right. If you’re thinking ahead this year, we’re here to help you plan not pressure. Because the best mortgage decisions aren’t rushed. They’re strategic.
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