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 "Buydowns" expected to see resurgence in popularity
A "buydown" is when sellers arrange to put money toward their buyer's monthly mortgage payment. This occurs during the first years of the life of the loan. This practice is expected to regain popularity with the slowing
of the housing market.


This type of arrangement usually enables sellers to pay amounts that are less than what would have been taken off of their asking price. The buyer benefits by having to pay lower monthly payments and a reduced interest rate, which increases by one percentage point every year until the buyers assume the entire payment.

Fannie Mae permits lenders to approve loan applicants at the first-year interest rate if the home being purchased is to be the buyer's primary residence and the buyer has obtained a credit score of at least 660. Buyers shopping for second homes or properties for investment purposes need to be qualified at the full interest rate.

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