Buying a home is an exciting milestone, but planning for monthly mortgage payments is an important part of the process. For eligible homebuyers exploring alternative financing, a Non-QM Buydown Program may provide an opportunity to start with lower mortgage payments during the first one or two years of homeownership.
With 2-1 and 1-0 temporary buydown options, qualifying borrowers can benefit from reduced initial payments before transitioning to their regular mortgage payment.
What Is a Non-QM Buydown?
A Non-QM temporary buydown allows eligible borrowers to make lower mortgage payments for a limited period without changing the loan's contractual interest rate.
The payment reduction is funded through an eligible seller or builder contribution, subject to program guidelines. These funds cover the difference between the temporarily reduced payment and the full scheduled payment.
Once the buydown period ends, the borrower begins making payments based on the full note rate.
Understanding the 2-1 and 1-0 Buydown Options
The program offers two temporary payment reduction structures:
2-1 Buydown
- Year 1: Payments calculated using a rate up to 2 percentage points below the note rate.
- Year 2: Payments calculated using a rate up to 1 percentage point below the note rate.
- Years 3–30: Payments calculated using the full note rate.
1-0 Buydown
- Year 1: Payments calculated using a rate up to 1 percentage point below the note rate.
- Years 2–30: Payments calculated using the full note rate.
These reductions are temporary and do not change the mortgage's actual note rate. Actual savings depend on the loan amount, interest rate, and applicable program terms.
Key Features of the Non-QM Buydown Program
This program includes several financing options for eligible homebuyers:
- 30-Year Fixed-Rate Mortgages: Available on qualifying fixed-rate purchase loans.
- Primary Residences and Second Homes: Eligible occupancy types, subject to investor guidelines.
- Full Doc and Alt Doc Options: Income documentation alternatives for qualifying borrowers.
- Seller- or Builder-Funded Buydowns: Temporary payment reductions funded through eligible contributions.
- Eligible Property Types: Certain 2–4 unit properties, PUDs, and condominiums, subject to program restrictions.
The program is available for qualifying purchase transactions subject to TRID requirements and applicable interested-party contribution limits. Refinances and DSCR loans are not eligible.
Who Might Benefit From a Temporary Buydown?
A Non-QM temporary buydown may be worth exploring for buyers who want to reduce their initial mortgage payment obligations while transitioning into homeownership.
It may also provide an option for self-employed borrowers or homebuyers using alternative income documentation who qualify for Non-QM financing.
However, buyers should carefully consider the full monthly payment that applies after the temporary buydown period ends. A temporary reduction should not be treated as a permanent decrease in borrowing costs.
Why Realtors Should Know About This Program
For real estate professionals, understanding temporary buydown options can create additional opportunities to discuss financing strategies with buyers and sellers.
A seller- or builder-funded buydown may be considered during purchase negotiations, subject to contribution limits and investor guidelines.
By working closely with a mortgage professional, Realtors can help buyers better understand their financing options and the payment changes associated with a temporary buydown.
Explore Your Home Financing Options With Tag Lending Group
Every homebuyer's financial situation is different. Understanding how a temporary mortgage buydown works can help you make a more informed decision about your next home purchase.
At Tag Lending Group, we're here to help you explore mortgage financing options, understand eligibility requirements, and determine whether a Non-QM temporary buydown may be suitable for your goals.
Ready to explore your options?
Let's discuss your home financing goals and find a mortgage solution that fits your needs.
Download the Non-QM Buydown Program Overview (PDF)
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Disclaimer: This article is for informational purposes only and does not constitute a commitment or guarantee to lend. Non-QM temporary buydowns are subject to investor guidelines, applicable contribution limits, and underwriting approval. Temporary payment reductions do not change the note rate, and payments increase when the buydown period ends. Program availability, eligibility, and terms may change without notice. Not all borrowers will qualify. Tag Lending Group, LLC | NMLS #2329372 | Equal Housing Opportunity.
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