Mortgage Ready Archives - Navy Fellas Realty Group

What To Know About The 2-1 Buydown Program You are probably excited to close on your home, but you may have also seen that your interest rate might be a bit higher. If you are looking for a way to save money, particularly if you have a lot of work to do on the home, you might be looking for a way to reduce your interest rate during the first couple of years. One option is to perform a 2-1 buydown. What do you need to know about this option, and how do you know if it is right for you?

How A 2-1 Buydown Works

This is a special type of program that can help you slightly alter the financing on your home loan. Specifically, it has been designed to reduce the interest rate during the first two years of your mortgage. During the first year of your mortgage, your interest rate is reduced by 2 percent. Then, it is reduced by 1 percent during the second year. By the third year, the interest rate goes back to normal.

The Benefits And Drawbacks Of 2 – 1 Buydowns

Like any financing option, there are some benefits and drawbacks to consider. The biggest benefit is that you can save money during the first two years of your mortgage. This can provide you with extra money to complete renovation projects and home repairs. On the other hand, the drawback is that your monthly payments will go up during the first few years. If you don’t have the income to match your monthly payments during the third year, you might find yourself in some financial difficulty.

Should You Do a 2 – 1 Buydown?

You may also be interested in this type of financing option if you plan on selling the house in the near future. For example, if you think you won’t be there for very long, you may not care what the interest rate is going to do in the future. On the other hand, if you really plan on selling the house quickly, you may want to talk to a professional about other financing options that could be even better for your specific situation. That way, you don’t end up paying more money than you have to.

Making Sure You Are Ready To Take On A Mortgage There is so much to know when it comes to homeownership that even wading into all of the information can seem overwhelming, but if there’s one thing you need when the time comes to purchasing a home, it’s to be prepared. Here are a few ways that you can ensure you’re ready for what a mortgage entails so that buying your dream home will be a positive experience you won’t regret.

Consider All Of Your Options

Instead of accepting the mortgage that your bank is offering you, it’s very important to do some research and determine what some of the best options out there are for you. While it’s entirely possible that the option pushed forward by your bank will work out, in the days of so much information online it’s silly to go into your biggest purchase blindfolded. Take some time out and read about the products available so that, when the time comes, you can make an educated decision.

Know Your Credit History

Lenders will most definitely be digging through your finances and credit history for anything that might make them leery of your financial state, but you’ll want to be aware of your own standing so that you can be prepared for what this might entail. By getting your credit report and score before going through the process of acquiring a mortgage, you can fix any errors that might be on your credit report so that you’ll be prepared for the result when the time comes for pre-approval.

Plan For The Future Possibilities

If the mortgage amount you are planning on paying seems feasible on a month-to-month basis, it’s certainly a good place to start, but if you not on a fixed rate mortgage, you will need to consider the ever-fluctuating state of interest rates, and you need to prepare for this reality at the same time. It’s important to base the amount you’ll be spending each month off of the income and expenditures that you’ve worked out in a budget, but you’ll want to add in some wiggle room so that a jump in the rates won’t sink your dream of home ownership.

There are many things to be aware of when starting the process of purchasing a home, but delving into your credit history and doing the necessary background research can make for a smoother experience. If you’re looking for advice on purchasing a home, contact your local mortgage professional for more information.