Subsidy Buydown Plans

A temporary subsidy buydown plans can allow you to pay a lower initial payment and have payment increase over time. Mortgages with temporary subsidy buydown plans may only be used for purchase transactions and cover primary residences that have anywhere between one to four units and they also cover second homes.

There are certain kinds of mortgages that do not qualify for buydown plans:

• Refinance Mortgages
• Cash-out
• No cash-out that use premium financing to fund any buydown plans
• Adjustable Rate Mortgages (ARMs)
• One-year ARMs
• Six-month ARMs
• 3/6-month and 5/6-month ARMs
• Manufactured Homes Mortgages
• Investment Property Mortgages

Mortgages with temporary subsidy buydown plans have different eligibility and underwriting requirements for the limited buydown mortgages and the extended buydown mortgages. For the former, the initial interest rate has a temporary reduction of not more than two percent what the note rate is and can only be increased by one percent for each year without exceeding two years. For the latter, the initial interest rate has a temporary reduction of not more than three percent what the note rate is and can only be increased by one percent for each year for over two years but without exceeding three years.

For lenders, mortgages with temporary subsidy buydown plans expand the number of qualified borrowers. For borrowers, mortgages with temporary subsidy buydown plans make payments predictable.