We all know that interest rates are higher than they were a year ago (and we all hope they don’t stay that way). A product that is becoming more popular is a 2-1 buydown, which provides a lower interest rate for the first year of the loan, then increases in the second year, and the third and subsequent years will have the full interest rate. To compensate for the lower payments, a fee is charged.

A buydown can be financed by either the homebuyer or the home seller. This payment can take the form of mortgage points or a one-time sum placed in an escrow account managed by the lender, which is then used to subsidize the borrower’s reduced monthly payments. Often, sellers, including home builders, utilize 2-1 buydowns as an incentive for potential buyers.

Buydowns are not available for all loans; for example, they are available on FHA loans but only for new purchases and not refinances. Check with us to see if a buydown makes sense for your situation.

When you apply for a mortgage you have to provide a lot of documentation, like bank statements, tax returns, and pay stubs. But sometimes, lenders also require a letter of explanation to better understand your financial situation. This letter can be essential in securing loan approval and should be treated as a requirement. It helps fill gaps in your financial picture and provides a deeper understanding of your ability to repay the mortgage.
A letter of explanation is typically requested when specific information in your application raises a red flag for the lender. For example, it may be needed to explain a job change, past credit issues, new credit card applications, large bank transactions, or unsteady income sources. Proactively submitting a letter of explanation can be beneficial if you are aware of potential issues in your application.
Of course in the event you need to provide a letter, we can help with it so you’re not in it alone 🙂