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What You Need to Know About 1-0 Buydowns

If you want to buy a home but are concerned about starting off with a large monthly mortgage payment, you may be able to ease into homeownership with a slightly smaller bill.

Meet the buydown loan. It offers lower monthly payments during the first one, two, or three years of the home loan. One of the most popular is a 1-0 buydown.

“1-0 buydowns may be a good option for customers that are just trying to get used to making mortgage payments,” said Sergio Montalvo, a sales trainer at New American Funding. “What's great about them is that the very first year of making a mortgage payments will be 1% lower rate than for the next 29 years in a 30-year loan.”

Some lenders offer these loans to borrowers. In other instances, the seller (or homebuilder if it’s a new home) may be willing to buy down the rate.

Homebuyers can ask their loan officers if a buydown makes sense for their circumstances.