Mortgages with Temporary Subsidy Buydown Plans
Temporary subsidy buydown plans are a good fit for borrowers who have the capacity for higher earnings within a few years of obtaining a mortgage. Buydown plans allow borrowers to benefit from temporary subsidies of the monthly payment of principal and interest.
Offering these products helps borrowers get access to lower initial payments and the stability of predictable payment increases.
Who are Mortgages with Temporary Subsidy Buydown Plans for?
- Borrowers who have the capacity for higher earnings within a few years of obtaining a mortgage
- Borrowers looking for lower initial payments with a temporarily reduced interest rate
- Borrowers with predictable payment increases based on the predetermined structure of an extended or limited buydown
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
- Ineligible Mortgages
- Buydown plans are not permitted for mortgages with the following characteristics
- 3/6-Month ARMs
- Cash-out refinance mortgages
- "No cash-out" refinance mortgages with a buydown plan funded from premium pricing
- Investment Property mortgages
- Mortgages secured by manufactured homes
- For mortgages with a buydown plan, the initial the initial interest rate may not be more than three percentage points below the Note Rate.
- The buydown plan may not extend for more than three years after the first scheduled payment date.
- Buydown plans are not permitted for Freddie Mac Home Possible® mortgages secured by 3- to 4-unit properties.
- Buydown plans are not permitted for mortgages with the following characteristics
- Delivery Requirements
See Guide Section 6302.18 for information on the delivery and pooling requirements for mortgages with a temporary buydown plan.
- Property Type/Eligible Properties
1-unit Primary Residence or Second Home
- Fixed-rate, 5/6-month, 7/6-month, and 10/6-month ARMs
2-unit Primary Residence
- Fixed-rate, 5/6-month 7/6-month, and 10/6-month ARMs
3- to 4-unit Primary Residence
- Fixed-rate, 7/6-month and 10/6-month ARMs
- Maximum LTV Ratios
Maximum LTV ratios must comply with Single-Family Seller/Servicer Guide (Guide) Section 4203.4.
- Eligibility/Underwriting
- For fixed-rate mortgages, the borrower must be qualified using monthly payments calculated at the Note Rate.
- For ARMs, the borrower must be qualified using monthly payments calculated in accordance with Guide Section 4401.8.
- If reserves are required, the reserves must be calculated using the Note Rate.
- If a Home Possible mortgage with a temporary subsidy buydown plan is subject to secondary financing, including an Affordable Second® that requires repayment to begin before the due date of the 61st monthly payment under the Home Possible mortgage, the secondary financing must have a fixed-interest rate.
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