Orlando, Windermere FL. Real Estate - Interest Rate By-Downs .......What?

One of the most common forms of buydown in use today is the 3-2-1 interest rate buydown. This is a temporary buydown, which would reduce the buyer's overall interest rate by 3% in year 1, 2% in year 2 and 1 % in year 3. This buydown can reduce the buyer's payments by up to $200 in the first year, $100 in the second year and $50 in the third year. The $200 per month reduction in payments is equivalent to giving the buyer an $800 raise in income for loan qualification purposes. It will increase the effective income ratio from 28% to approximately 38% for the buyer. Probably more importantly, it gives the buyer time to build up to the higher payments. The cost to the homebuilder or seller to provide the 3-2-1 interest rate buydown is approximately 5% of the sale price. Since many builders or sellers are willing to drop their prices by 5% or more to make the sale, this buydown is within the seller's capabilities. The advantage is the buyer will purchase the seller's house at 3% interest instead of 6% during the first year, giving the seller a greater competitive advantage, while giving the buyer a greater perceived purchase value!

About the author:

Jerry LaRose is an Orlando Area Residential Real Estate Expert, who can assist you with the purchase and/or sale of real estate in Orlando, Florida or any place in the country. Jerry has created a team of professionals throughout Orlando and the country to ensure that you enjoy a smooth transition to your new area. Please visit http://www.jerrysellsorlando.com/ for your real estate needs. Please give me a call if you have questions about the Orlando and Central Florida real estate market.

Jerry LaRose, P.A., ABR, GRI, e-PRO, CLHMS, REALTOR® 407-580-7011

(Copyright © 2008 By Jerry LaRose, P.A. All Rights Reserved.)