FHA Loans – FHA Loans Buy Down Programs

This FHA 2-1 Buy Down loan program allows you to pay a fee on a 30 or 15 year fixed rate mortgage to temporarily get you a lower rate. This program allows you to essentially ‘buy’ yourself a 2% lower interest rate for the first year, 1% lower interest rate for your second year, and then returning to the original interest rate starting from the 3rd year. This program is allowed only for a purchase of a property and does not apply on refinance mortgages.

This program allows a buyer to consider a higher priced home with their current income, knowing that their financial situation will improve by the third year. The first two years will allow you to have lower monthly mortgage payments until you are able to comfortably afford the full interest rate of your FHA loan.

This FHA Buy Down program also has an option for you to pay a lesser fee and do a 1-1 Buy Down. This essentially is the same concept as the above, but the first year will only ‘buy’ you 1% lower than your set fixed interest rate instead of the 2%. The second year, you will get the same 1% discount and then the third year will go back to your fixed interest rate.

FHA Buy-Down Program Qualifications

To qualify for these FHA Buy Down programs, you will have to show the underwriter that at least one of the following requirements are met:

  • You are able to display a future rise in income that will be able to support the future payment increases.
  • You are able to display your ability to meet the future payment increase by allocating current income in a different manner to match the changing fixed interest rates. This may mean that you expect a major current expenditure to end within the next 1 or 2 years.
  • You are able to show a significant asset amount that is able to counteract the temporary interest rate cut.
  • Your initial down payment greatly outweighs the minimum required.

This FHA Loans Program provides a great benefit for those looking for a higher valued home as long as your financial situation will improve within the first three years and you meet the FHA Loan Requirements.