It seems when I look up info about the same thing I find something different than I did the last time. My MC should have forwarded my file last friday so I’m trying to co firm how far I can really buy down my interest.
I live in Houston.
I am below 80% med income ( I do not think I qualify for the .50 contribution due to the city not being noted on a short list on here. I could not figure out how to see if the city was on the list on the website link provided on a previous post.) PLEASE correct me if I am wrong.
My mrf is around 6671
I have a total of 20k saved up at this point.
How far can I buydown interest?
I am under the impression I can only buy down 5 points.
The government limits hud certified agencies such as naca to allow 5 points in interest reduction from the buyer plus up to an additional 10 points from the seller. Anything beyond that goes toward principle reduction which is a true down payment. Your emd counts toward your buy down and prepaid taxes and insurance. However with today’s rate of 2.75 that’s only about 10 points total you can use instead of the maximum 15…the interest rate would need to be over 3.5 to take full advantage.
With that said the only real limit to what you can spend depends on what you have. If you are buying a 200k house you could buy down 5 points. If you are buying a 500k house you don’t have enough saved for 5 points of buy down.
Unfortunately, the Houston metro is not one of the areas eligible for the automatic 0.5% interest rate reduction.
Remember that the buydown is a rate reduction of 0.25% per each point (1% of the mortgage amount) paid in buydown funds on a 30-year loan and 0.5% per point on a 15-year loan, so how much you can buy down is based on the amount of the mortgage, how much money you have available (which includes grants, gifts, etc.), whether it’s a 15 or 30 year loan, the five point limit for personal buy down contribution and the ten point seller limit.