Financed Permanent Buydown Mortgages
The Financed Permanent Buydown Mortgage lowers borrowers' monthly payments without requiring additional cash at closing.
With this offering, your borrowers can permanently reduce their interest rate by financing up to three discount points into the loan amount for fixed-rate mortgages and 5/6-Month, 7/6-Month, and 10/6-Month ARMs. By financing the discount points up front, the interest rate can be up to 75 basis points lower than prevailing market rates.
By combining a Financed Permanent Buydown Mortgage with other flexible Freddie Mac mortgage products, more borrowers can qualify for larger mortgage amounts. For refinance borrowers, a Financed Permanent Buydown Mortgage may be an exceptional option to refinance from high interest-rate loans to below-market interest rates.
Use Financed Permanent Buydown Mortgages to offer better rates and lower payments to your borrowers and retain more borrowers while providing an attractive refinance option for borrowers with ARMs that are adjusting to higher rates, to minimize payment shock.
Who are Financed Permanent Buydown Mortgages for?
- People looking for lower monthly payments with no additional cash at closing.
- Borrowers looking to obtain a lower interest rate while increasing purchasing power.
The information on this page is not part of, and is not a replacement or substitute for, the requirements found in the Freddie Mac Single-Family Seller/Servicer Guide and your other Purchase Documents.
Product Features
- Credit Fees
- Credit Fees in Price apply based on the unpaid principal balance of the mortgage (including the financed discount points) and the gross LTV ratio.
- See Guide Exhibit 19 for details on these fees and all other applicable fees.
- Delivery Requirements
See Guide Section 6302.24 for special delivery instructions for all Financed Permanent Buydown Mortgages.
- Eligibility/Underwriting
- Loan Product Advisor℠
- Non-Loan Product Advisor
- Minimum Indicator Score of 620 unless otherwise specified in the Guide.
- All mortgages must meet the risk class and/or minimum Indicator Score requirements in Guide Exhibit 25, where applicable.
- Maximum debt-to-income ratio of 45 percent for manually underwritten mortgages.
- Borrower qualification is based on the monthly housing expense-to-income ratio calculated using the monthly payment at the permanent bought-down note rate.
- The maximum amount a borrower can finance for a permanent buydown is three discount points, calculated based on the base mortgage amount.
- For ARMs, the permanent buydown is in effect for the initial note rate and each note rate adjustment for the entire term of the mortgage. The lifetime ceiling will be calculated using the permanent bought-down initial note rate. The permanent buydown does not affect the margin, initial cap or periodic cap.
- Mortgage insurance coverage required per Guide Section 4701.1 based on the gross LTV.
- Financed discount points count toward the HOEPA 8 percent limits. Freddie Mac does not purchase HOEPA loans.
- Eligible Mortgage Products
- Fixed-rate mortgages
- 5/6-Month, 7/6-Month or 10/6-Month SOFR-indexed ARMs
- Execution Options
- Servicing-retained Cash
- ARM Cash
- Fixed-rate Guarantor
- WAC ARM Guarantor
- MultiLender Swap
- Maximum LTV Ratios
Maximum LTV ratios must comply with Single-Family Seller/Servicer Guide (Guide) Section 4203.4
- Property Type/Eligible Properties
- 1- to 4-unit primary residences, including condos, PUDs and manufactured homes.
- Second homes
- 1- to 4-unit investment properties
- Transaction Type
- Purchase
- No cash-out refinance
- Cash-out refinance
Growing Your Business
From valuable training and networking events to advanced tools and applications that help you work smarter, Freddie Mac has the resources you need to expand into new markets and grow your revenues.
Resources for Borrowers
Reaching and educating borrowers – and helping them find the right mortgage – is essential for your business. Freddie Mac provides an array of materials you can share with your clients and business prospects.