Gig Harbor Undressed

What is a seller buy down?

“Seller buy down” is becoming a more and more common phrase in the real estate industry these days.  What exactly does it mean?  I’ll give you the basics, and if you really want to delve into the specifics I urge you to contact Bill Hannon at Pierce Commercial Bank. 

A “seller buy down” is basically a contribution that the seller makes to the buyer where they give a specified sum of money to the buyer’s bank.  This money “buys down” the buyers’ interest rates.  Sellers are no longer able to contribute money towards a buyer’s down payment, but they are still able to give up to 6% (depending on the loan program and down payment amount) towards the buyer’s closing costs.  Part of this money can include “buying down” an interest rate.

There are permanent buy downs and temporary buy down programs.  Let’s look at an example to see how much money this can save you as a home buyer.  Let’s take the property I have listed for sale (look in the right hand scroll bar) at 1206 Moorlands St in Tacoma.  That home is offered at $269,950.  If you as a buyer came in with 3% down ($8098.50), you’d have a loan amount of $261,851.50.  At a 7% note, your monthly payment would be around $1742,17.  If the seller was willing to “buy down” your rate on a 2:1 buy down (2% the first 12 payments, 1% the next 12), your payment would drop to $1405.73 for the first 12 (a savings of $336.44 per month!), and $1569.99 for the next 12 payments (for a total savings of $6103.44 the first 2 years!). 

Amazing the difference that interest makes, isn’t it?  My seller is offering a 2:1 buy down, by the way!  That means that many folks who are renting in Tacoma could likely afford to buy this house for the same or less than their current rent!  Again, this is a possible scenario…please contact Bill Hannon or a loan officer of your choice for specifics and full information.  If you’d like more specific information on my Moorlands home and how a buy down could benefit you, please let me know.

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