mortage buy downs

[cwallace]

I need to know what a mortage buy down is and how it works and if the law governs any specific amounts,

 

[HomeGuru]

<BLOCKQUOTE><font size="1" face="Verdana, Arial">quote:</font><HR>Originally posted by cwallace:
I need to know what a mortage buy down is and how it works and if the law governs any specific amounts, <HR></BLOCKQUOTE>

A buy-down is the process of paying a certain fee known as points to "buy down" the interest rate on the mortgage. Ex: the regular interest rate is 8% with an option to buy-down the rate and pay an upfront fee of say $ 2500 so the interest rate will be 7 3/4% through the first several years of the life of the loan. Just think of it as an upfront prepayment of a percentage of the interest. Sometimes a buy-down is needed so that the homebuyer can qualify for the loan at the lower monthly payment based on the lower "bought-down" interest rate.