If you’re thinking about purchasing a home and you’re worried about the mortgage payment. Fear not, some, but not all mortgage companies might offer a buy-down program allowing you to get a below-market interest rate…

It’s no surprise mortgage rates are presently on the higher side averaging 6.4 to 6.99 depending on your credit score, occupancy, loan size, and down payment. A strategy that might benefit you when purchasing a home particularly if you’re concerned about your mortgage payment would be a buy-down program.

Let’s assume for this example that the mortgage rate we’re looking at is 6.5% on a 30-year fixed rate. That’s the end-capped-out interest rate on your mortgage. In year one the interest rate is 4.5. In year two the interest rate is 5.5%  meaning that in the first 2 years the interest rate is lower then rolls to 6.5 for the 28-year duration of the 30-year term.

The 3-2-1 buydown works in the same identical fashion with the first 3 years of loan supporting lower payments. The buydown programs generally require paying some form of discount points. Discount points are paid form of an upfront premium to get a lower interest rate. These could be paid for by the buyer or seller.

The buy-down program could lend itself very nicely to not only having a lower interest rate and a lower monthly payment right out of the gate. A lower mortgage payment supports a cash flow while waiting for long-term rates to fall.

If you’re concerned about payment as relates to buying a home a buy-down program for the first 2 years of the first 3 years could very easily help bridge the gap between your goal of getting a lower monthly payment while at the same time getting the home that you can afford. If the seller of the property can pay those additional fees for you all the better if not, you could still pay those fees yourself and still have the luxury of having the payment lower right out of the gate.

One other thing you should know is that on high-balance loans which are generally loans bigger than $647,200, a 3-2-1 is not generally an option but, a 2-1 buydown is.

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