With interest rates almost doubling since the beginning of 2022, we are starting to get a lot of interest in the temporary buydown program. With VA loans, you have the option to buy down the interest rates up to 3% from the note rate. This strategy can help reduce the monthly payment in the first few years of your VA loan.
How does it work and what are the costs you will need to ask a seller to pay?
First let’s talk about how a temporary buydown works. Below is a example of a 2-1 buydown where the interest rate is lower for the first 2 years of the loan.
Example: VA loan at 6.50% that is bought down to 4.50% the first year and then adjust to 5.75% the second year, then adjusts to 6.5% for years 3-30. The cost. The payment reduction in the first year can be upwards of $600 lower on a $500,000 purchase and $300 lower the second year. The cost which can range from 2%-2.5% can be paid by the seller.
For more information on VA loans that have a buydown, feel free to reach out to your Washington State VA loan Guru Kevin Tinsley 253-472-1500.
www.vahomeloans.com Washington State’s Source for Low VA Rate Home Loans.