Seller-Funded 2-1 Buydown Requirements
Check seller cost, buyer qualification, contribution limits and commissions calculated as a percentage of the sale price.
A seller-funded 2-1 buydown can benefit the seller, buyer and listing agent. The seller may concede less than a particular price reduction, the buyer gets temporary payment relief, and the agent has a financing incentive to market. If the agreed commission is calculated as a percentage of the sale price, keeping the sale price unchanged keeps that commission calculation unchanged. The commission agreement controls the actual amount. The actual loan determines the subsidy cost.
Here are the five financing questions I would work through with you.
1. What would the seller contribution fund?
It would fund a temporary subsidy toward the buyer’s principal-and-interest payments. The assistance is larger in the first year, smaller in the second, and ends after two years. The interest rate on your loan stays the same. Temporary-buydown requirements.
2. What would the incentive cost?
The amount comes from the actual loan and payment schedule. I can calculate the required funding and explain exactly what payment assistance it provides. In some scenarios, that assistance may cost the seller less than a particular price reduction. That is a financing calculation, not a blanket promise or a recommendation about the property’s price.
3. What would the buyer pay at each stage?
Ask for a written breakdown of the buyer’s first-year payment, second-year payment, and full payment afterward. Include taxes, homeowners insurance, and any mortgage insurance. The buyer can then see the early benefit clearly and plan for the full housing expense.
4. Does the proposed loan qualify?
Eligibility and program availability need to be checked for the specific transaction. For a fixed-rate loan following Fannie Mae’s rules, qualification uses the interest rate on your loan without the temporary subsidy. Qualifying-payment requirements.
The buyer should be comfortable with the full payment without counting on future refinancing.
5. How does it fit with other seller assistance?
If the seller is also helping with eligible closing costs, review the assistance together. Fannie Mae includes the seller-funded subsidy in its applicable contribution limits. Seller-contribution requirements.
Getting these answers early gives everyone clear financing information. The Realtor handles pricing and contract negotiations; I explain the loan option, calculate the incentive, and help identify what the selected program permits.
Ask me to review an Ohio seller-funded buydown scenario.
Gordon Hinchen, Mortgage Loan Originator | NMLS #2751302 DRG Mortgage, LLC | NMLS #2657603 Ohio residential mortgage brokerage services only. Equal Housing Opportunity.
Educational information, not a loan commitment or rate offer. Eligibility, program availability, and seller-contribution limits apply. No loan approval or refinancing is guaranteed.