Kenneth R. Gosselin, of the Harford Courant, wrote on 11/2/06 that buydowns are becoming more popular again. Buydowns are a procedure that sellers will offer to contribute money toward the mortgage payments for the first few years of the loan of a potential buyer of their home that is on the market. This practice usually enables the sellers to get a contract price offer closer to their asking price and at the same time benefit the buyer with lower monthly payments initially and a lower interest rate. The interest rate usually rises 1% each year until the buyers assumes responsibility for the entire payment. If the home is to be the buyer’s primary residence and he or she has a credit score of 660 or better, then Fannie Mae will permit lenders to qualify the buyer at the first-year interest rate.
