Skip to main content

Buydowns- What are they and how do you get one?

Seller Buydowns

If you're in the market for a new home, you've probably come across the term "seller buydown" in your search. But what exactly does it mean, and how can it benefit you as a homebuyer? In this post, I'll explain everything you need to know about seller buydowns and how they work.

Pay special attention if you're a potential buyer in the DFW area and the interest rates are keeping you from purchasing a home.

A seller buydown is a financing technique where the seller pays an amount of money upfront to reduce the interest rate on the buyer's mortgage. Essentially, the seller is "buying down" the interest rate on the buyer's behalf, which can help make the home more affordable in the early years of ownership. This is a great technique that agents are suggesting as a win-win scenario for both buyers and sellers. It makes the home more attractive to a buyer who is nervous about those higher interest rates. And it leaves more money in the seller’s pocket when conversely, they would’ve had to drop their list price by a significant amount.

There are several options for buydowns both temporary and permanent, but a popular example is a 2-1 buydown. 

For example, let's say you're buying a home with a mortgage of $900,000 at an interest rate of 6%. The seller offers a 2-1 buydown, which means they'll pay upfront to lower the interest rate by 2 points or down to 4% for the first year, then 5% for the second year, and it will go back to the original rate of 6% after that.  This can save you thousands of dollars in interest payments over the course of the year, which can help make the home more affordable. Plus, hopefully by then rates will have come down enough that you can refinance. However, a buyer still would need to qualify at that higher rate.

So why would a seller offer a buydown? There are a few reasons. First, it can help make their property more attractive to potential buyers by lowering the monthly payments in the early years of ownership. Second, it can help them sell the home more quickly, which can be especially beneficial if they need to move on to their next property quickly. Finally, it can be a way to negotiate a higher selling price, since the buyer will be getting a lower interest rate upfront.

It's worth noting that seller buydowns are not without their downsides. They can be expensive for the seller, and may not be worth the cost in some cases. Additionally, they can be complicated to set up and may require the assistance of a professional real estate agent, a skilled lender, or attorney.

If you're considering a seller buydown as part of your home purchase, it's important to do your research and weigh the pros and cons. Work with a knowledgeable real estate agent who can help you determine if a buydown is the right choice for you, and make sure to read and understand all of the terms and conditions before signing any agreements.

Seller buydowns can be a useful financing tool for homebuyers looking to make their monthly payments more affordable in the early years of homeownership. If you're considering a buydown as part of your home purchase, be sure to do your due diligence and work with an experienced real estate professional to ensure that it's the right choice for you.

If you're interested in learning more about seller buydowns, or if you're in the market for a new home in the Dallas/Fort Worth area, feel free to reach out to me. I have experience helping homebuyers navigate the complex world of real estate and I work with some of the best in the industry that can help you get the best terms possible for your mortgage. Don’t hesitate to reach out as I'm always here to help.


If you or someone you know is looking to buy or build a home in the DFW metroplex, download my FREE buyers guide to get started.


~Crystal Finney, Hometastic Realty Group brokered by eXp Realty

Click here to learn more about me.

Comments

Post a Comment

Popular posts from this blog

From Arizona to Aledo, TX in 24 Hours: How We Landed the Right Lot in Walsh Ranch

  From Arizona to Aledo, TX in 24 Hours: How We Landed the Right Lot in Walsh Ranch Thinking about a move to Aledo or West Fort Worth? Here’s a quick, real story about how I helped Danielle relocate from Arizona and secure an oversized corner lot with Highland Homes in Walsh Ranch... fast. The Situation Danielle had done tons of research from out of state and kept seeing my name for Aledo new construction. Larger lots in Walsh were disappearing quickly, and decision fatigue was real. The Plan We started with a Zoom call to cover: What daily life in Aledo is actually like Pros and cons of Walsh (and how it compares to nearby areas) Which builders make sense for her goals (and a few to skip!!) The step-by-step path from “we’re moving” to “we have the keys” On-the-Ground Help (Before She Flew In) I toured her shortlist for her and sent a simple recap package: Short videos of the models and neighborhoods Floor plans and current pricing Lot maps with notes...
Post a Comment
Read more

Who Is the Best Realtor in Aledo, TX for New Construction?

  Who Is the Best Realtor in Aledo, TX for New Construction? If you’re planning to build a home in Aledo, TX, one of the first questions you may have is: “Who’s the best Realtor for new construction?” Not all agents are equipped for the unique process of building a home; which is why choosing a specialist matters. A Realtor who knows new builds can: Negotiate contracts and upgrades that protect your investment. Guide you on which upgrades add long-term value. Offer insight into Aledo’s top new construction communities, like Walsh Ranch, Parks of Aledo, Bella Flora, La Madera, Kelly Ranch, Bluejack National, and McDavid Springs. That’s where I come in. I’m Crystal Finney, REALTOR® and team lead with Hometastic Realty Group with Real Broker, LLC. Since 2023, I’ve closed more than $8M in sales across 12 transactions, many of them new builds. I’ve also personally designed and built two homes, giving me first-hand experience in the process which has been HUGE in assisting others with t...
Post a Comment
Read more

Pricing a Home to Sell in the DFW Metroplex

In the dynamic Dallas/Fort Worth real estate landscape, while the pace isn't as feverish as the 'unicorn' years of 2020-, strategically priced homes continue to command swift sales and spark competitive bidding. This phenomenon is fueled by the persistently low inventory of available homes. Recent data shared by the National Association of Realtors (NAR) underscores this trend, revealing that a remarkable 76% of homes found buyers within a single month, with an average of 3.5 offers per home recorded in June. To position yourself advantageously amidst these favorable dynamics, enlisting the expertise of a skilled agent is paramount. A seasoned agent possesses the critical insights required to accurately determine the optimal asking price for your property. Here's the significance of getting this price right in today's market climate. The price you establish for your property carries a substantial message to potential buyers. Should you set it too conservatively, you...
Post a Comment
Read more