Mortgage Buy-Downs Can Spur Home Sales

With interest rates on the rise and both home sales and price gains braking, more sellers are offering mortgage help to buyers in the hopes of getting better offers. Sellers hope that offering to pay money to the lender to permanently lower the buyer’s mortgage rate will help bridge the gap between the price the sellers need or want and the amount buyers are willing to pay. For-sale signs increasingly are promoting “seller-assisted below-market-rate financing” or interest rate buy-downs, which Mortgage Bankers Association CEO David Stevens calls “a pretty good opportunity” for buyers and sellers to come together, provided that the numbers work for both sides. However, buy-downs may not be attractive to buyers who prefer sellers to contribute to the closing costs or reduce the sales price; and they will not work as well when the capital markets require more cash to buy down rates, with a half-percentage-point note rate reduction possibly costing more than two points. | Read More