Can we stop talking about Buydowns? zzzz

Mortgage and Lending with CMG Home Loans NMLS 248937


Buydowns: Don’t get caught up in the Hype.

Buydowns are NOT the greatest thing since sliced bread. They aren’t new, in fact they are an ancient tool we put at the bottom of the toolbox 30yrs ago because it doesn’t work as well as others at our disposal.  

Here’s why:

  • In today’s world a seller MUST pay for the buydown.  Last I checked it is still a seller’s market (at least it is in my market) and seller concessions are not the norm.
  • You will also have to qualify at the note rate, so the highest years rate is where your ratios are based so qualifying may actually be more difficult with a buydown.
    • Back in the 80s and early 90s we used 2/1 buydowns all the time as a tool to qualify at a lower rate. When guidelines changed and didn’t allow for that anymore we stopped using them. 

With interest rates up people are just looking for smoke and mirrors and conversation points.  Most of our clients would be better off paying 1 point or so to reduce their rate permanently – 1 point can reduce your rate today by ¾% which is a bargain since a normal market would only give you about a 0.25% in rate for a point.  The other piece we seem to forget about- The rate is not forever and all the forecasts and behind the scenes numbers are pointing to rates much lower in the coming year. The reason it has been difficult to find a zero point rate at times is because even the secondary market for Mortgage Backed securities feels rates will be go down significantly enough to cause a refi boom and investors do not want to invest in long term investments that will pay off early.


Buy the house, begin building equity and refinance it when rates drop. 

If you can get a sellers concession use it for closing costs. Bank the difference to pay off some debt, moving expenses or save to pay for your refinance next year.

If you need a Mortgage or an Equity loan, We can help- Everywhere but UT, Give me a call.

Robert Rauf 
Mortgage Loan Originator NMLS# 248937 
or my blog: 
Office: (732)908-4868  Cell (732)740-0175

Since 1987 I have been helping my clients fulfill their dream of home ownership! HomeBridge Financial Services, Formerly REMN, HomeBridge Financial Services is located at 9 Grand Ave, Building 2 Suite A Toms River, NJ 08753. NMLS #6521. New Jersey Licensed Lender and Mortgage Banker #L041053. Visit or for more information. NJ Mortgages, New Jersey Mortgages, Mortgages in NJ, mortgage in New Jersey, Mortgages in New Jersey, Toms River NJ 08753, Toms River NJ 08755, Brick NJ 08723, Brick NJ 08724 Mortgage in Ocean County NJ, Mortgage in Monmouth County NJ, Jackson NJ 08527, Howell NJ 07731, Lacey 08731 08734, Beachwood 08722 Bayville 08721, 

Comments (4)

Michael Jacobs
Pasadena, CA
Pasadena And Southern California 818.516.4393

Hello Robert - it seems to me that buyers seem to find a way to make real estate transactions "happen".   Those who say that it's impossible or find other excuses continue to look.  And look.  

Nov 09, 2022 09:41 AM
Robert Rauf
CMG Home Loans - Toms River, NJ

Michael Jacobs My main purpose for this post was a bit of a rant.  it isnt any secret sauce that was just invented and it really is of no benefit to a buyer, just smoke and mirrors to make people feel good.  But I agree, we still have buyers - and on the right coast we still need inventory to fill their needs.

Nov 09, 2022 12:06 PM
Mike Frazier
Carousel Realty of Dyer County - Dyersburg, TN
Northwest Tennessee Realtor

What great advice to give borrowers today. Thanks for sharing.

Nov 09, 2022 02:41 PM
Robert Rauf
CMG Home Loans - Toms River, NJ

Mike Frazier Thank you!  I appreciate you stopping by to read.

Nov 10, 2022 09:23 AM