09/15/2022
Here is an explanation to help with the chart above. Depending on the investor... Our jumbo rates jumped up to 5.625% to 5.875% in the past few days. Conventional is ranging from 5.875% - 6.125% We have a few investors that offer the 2-1 and even though they are not the best priced, they provide an option that could be very helpful. Instead of dropping the price of a home, the seller can offer to pay for the 2-1 buy down if you negotiate it into the contract. Reducing the sales price affects the market value of future listed homes. Max loan amount to qualify for this program in San Diego is $879,750 for a 1-unit property. I priced out an option below, for you to review. See diagram below...
Explanation: Instead of the seller dropping the price of their home, the seller provides a credit for $16,041.96 at the close of escrow. This money is held with the lender and subsidizes the buyer's monthly payment. For the first 12 months the buyer’s payment will be reduced by $883.35. The following 12 months the buyer’s payment will be reduced by $453.48 and after that the payment goes back to normal.
Why would this be good for the buyer besides the lower payment for 24 months? Forecasters predict that rates will come back down over the next year or two. This will give buyers a lower monthly payment until they can refinance to a lower rate.
What happens to the subsidy account if they refinance? Whatever is left in the subsidy account will be refunded back to the borrower by reducing their payoff amount when they refinance into the new loan. Let me know if you have any questions.
