I know, I know – everyone already knows that you can get 102% financing at 4%.
Yes. You can.
And I am going to look super smart for telling you this next part about how you actually get this deal…
You buy a house that is designated rural according to the USDA rural database (hint: you might be surprised at how rural it doesn’t have to be) and then by default, you are eligible for the USDA loan program which allows you to finance up to 102% .
Ok, so not that big of a deal you might be thinking.
But if interest rates are at 6% today for this program, how do you get it at 4%?
It is called a 2/1 buydown.
No, a 2/1 buydown is not new – they have been around for years. In fact, back in 1995 (give or take a year) I used a 2/1 buydown on my first condo. To keep it short — basically, a 2/1 buydown is where you set aside a small pile of money (yes, you can finance it or get the seller to pay for it) and for the first year of your mortgage, your payment is amortized at a 4% interest rate. The second year of your mortgage, your payment is amortized at a 5% interest rate. Then the remaining 28 years of your mortgage, your payment is at 6% (or whatever the market rate is at that point).
Someone once told me that a good magician never reveals his tricks.
Lucky for me, I am just a loan officer.
Want to learn more about the USDA rural home loan program and how you can borrow 102% of the appraised value of a home at 4%? Call us.