2/1 Buydown
This illustrates how the home may be more marketable by offering financing concessions to the buyer rather than lowering the price.This is a fixed rate mortgage with the buyer qualifying at the note rate. The seller would be pre-paying the interest in advance.The buyer’s first year payment would be based on an interest rate 2% lower than the note rate. The second year’s payment would be based on an interest rate of 1% lower than the note rate. The remainder of the payments is at the note rate.
3/2/1 Buydown
This illustrates how the home may be more marketable by offering financing concessions to the buyer rather than lowering the price.This is a fixed rate mortgage with the buyer qualifying at the note rate. The seller would be pre-paying the interest in advance.The payments are calculated at 3% less than the note rate for the first year and 2% less for the second year and 1% less for the third year. The payments for the fourth and remaining years of the mortgage are at the note rate.The cost of the buy down is the difference in the payments in the first, second, and third years from what they should have been.
Financing Concessions
This form is meant to show an application of seller-paid funds toward a 2-1 Buy Down and Buyer closing costs. This could be used to increase the marketability of a listing or to construct a buyer’s offer.
80/10/10 Comparison
This calculates the payments on the first and second mortgage that equal 90% and the blended rate which is compared to a 90% loan requiring PMI. Most loans greater than 80% loan-to-value requires Private Mortgage Insurance.
A combination of an 80% first loan and a 10% second loan allows the buyer to only have 10% cash investment and avoid the expense of PMI. The second loan could come from a conventional lending source or possibly from the seller. It must be disclosed in the sales contract.
Income Estimator
The Income Estimator calculates the minimum amount of income and the maximum amount of debt needed to qualify for a mortgage at a specific rate.
If the borrower’s debt exceeds the maximum amount, an increase in income is needed.
Other factors not considered in this form determine whether a person qualifies for a loan that are not considered in this form such as credit score, references, length of credit, ability to repay, and the property’s ability to secure the loan.
Assumption Comparison
The Assumption Comparison helps a buyer to determine the advantages of assuming a FHA or VA mortgage with a lower interest rate compared to originating a new mortgage at a higher, market rate. The savings on the assumption can be in lower principal and interest payments, equity growing faster and lower closing costs. The choice is purchasing the property with a new conventional loan or assuming the existing mortgage with possibly a second mortgage. This comparison assumes that the purchaser will put an equal amount down to assume the existing mortgage and get a second mortgage for the difference.
FHA MIP Release
The Annual Mortgage Insurance Premium on a FHA loan adds a considerable expense to a mortgage payment. It is cancelled when the loan-to-value reaches 78% of the original sales price. The date can be accelerated by making additional principal contributions to the loan. This app will serve as a tool to determine the required additional principal payments.
