As a first-time home buyer, the idea of taking out a mortgage can seem overwhelming. However, with the right information and a bit of planning, the process can be much less daunting. That’s where buy-down information comes in. A buy-down, also known as a temporary rate buy-down, is a process where a seller can contribute to a buyers custodial account (escrow) to fund a lower interest rate for the first few years of the buyers’ mortgage. There are a few different types of buy-downs available, but the most common is called a 2/1 buy-down. This means that for the first two years of your mortgage, you will have a reduced interest rate of 2% below the start rate. For the following year, your rate will increase to 1% below the start rate, and then return to the standard rate after that for the remaining 28 years. This can be a helpful option for those who want to lower their monthly payments in the first few years of homeownership, while they adjust to new expenses and obligations. Another type of buy-down is the 3/2/1 buy-down. With this option, you’ll have a 3% rate below the start rate for the first year of your mortgage, 2% for the second year, and 1% for the third year. After that, your rate will increase to the standard rate. And finally, there is a 1-1 buy-down. This means that for the first two years of your mortgage, you will have a reduced interest rate of 1% below the start rate. This can be a great option for those who are starting out with lower income but expect to have higher income in the near future. Overall, buy-downs can be a helpful tool for first time home buyers. They can provide some breathing room in the early years of homeownership and help make monthly payments more manageable. If you’re considering a buy-down, make sure to call us and we will walk you through all the steps and benefits of these options above.