Following is an example of
how the initial "Buy-Down" fee
is calculated:
Example: Standard 30 Year FHA Loan $100,000 Loan Amount
8% interest rate = $8,000 a year in interest
With the 2/1 buy-down the transaction would be as follows: $100,000 Loan Amount
1st. year = 6% Interest rate = $6,000 in interest, a savings of $2,000
2nd. year = 7% interest rate = $7,000 in interest, a savings of $1,000
3rd - 30th. year = 8% interest rate = $8,000 in interest
The 2/1 Buy-Down is a normal
30 year loan but you pre-pay for a decreased interest rate for the
first two years. So in the above example, the lender would charge $3,000
fee to "buy-down" the
loan, since this is the difference in interest. This is just an example
of how the loan works and the actual "buy-down" fee will vary
based on the loan amount and interest rate.
The benefit of this program is that it will allow for
lower payments in first years and will help a homebuyer qualify for a
larger loan based on the FHA qualifying guidelines.
Now that you understand the FHA 2/1 Buy-Down loan,
learn about FHA loan qualifications. |
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