Everything Buyers Need To Know About Seller Concessions and Rate Buydown

Calling all buyers! We have good news: The Dallas real estate market is looking more buyer-friendly than it has in years! The bad news? Rising interest rates are putting a damper on many buyer’s purchasing power. Fortunately, if you’re looking to purchase a home in the Dallas area, we’re here to make it easier—and more affordable—for you.

Did you know that securing a temporary rate buy-down as a seller concession could save you hundreds of dollars on your monthly payment? It’s true. This little-known seller concession could help you secure your dream home, even when interest rates are high.

Curious to know more? You’re in the right place. To learn more about how to save money on your Dallas real estate purchase, keep reading.

What is a buy-down concession?

It’s easy to see why buyers in Dallas are worried about mortgage rates: They’ve been rising steadily. The result? Real estate inventory has increased slightly, which means there’s less competition between buyers.

A buy-down concession is offered by sellers to incentivize buyers to purchase their property. The benefit to buyers is that it lowers their interest rate, typically for one to three years. Using a seller concession to buy down the loan rate temporarily lowers the buyer’s monthly mortgage payments, making them more affordable—especially as interest rates rise. Successfully securing a buy-down concession is the best way for today’s buyers to get the home they want, at a price they can afford.

A buy-down concession benefits sellers because it makes their home more competitive in the Dallas market. In addition, sellers who offer a buy-down concession may be able to sell their homes faster.

How does a rate buy-down work?

Buyers can apply a temporary rate buy-down as a seller’s concession to their fixed-rate mortgage. For instance, if you qualify for a 7% fixed-rate mortgage, the seller’s concession can temporarily reduce your interest payment on a 2/1 buy-down: 2% reduction the first year (to 5%) and 1% reduction the second year (to 6%). Compared to a significant price reduction, buying down the rate as a concession is surprisingly affordable for the seller. Plus, as the buyer, you get to enjoy more affordable monthly payments for the first one to three years!

There are three different rate buy-down options:

● 3/2/1: 3% reduction the first year, 2% reduction the second year and 1% reduction in the third year.
● 2/1: 2% reduction the first year and 1% reduction the second year.
● 1/0: 1% reduction the first year and 0% reduction the second year.

At closing, the agreed concession is applied to the rate you qualify for and reduces your rate accordingly. As this reduction is applicable to a fixed-rate mortgage, after the reduction ends, your rate will return back to the original rate you qualified for.

What Are Some Other Benefits of a Buy-Down Concession?

● If mortgage rates go up, you don’t need to worry! Even after a buy-down concession ends, your rate will never exceed the qualified note rate you originally agreed to.
● If mortgage rates go down, you can refinance your loan and apply any unused portion of the concession towards your new loan.
● If mortgage rates stay the same, you can be confident knowing that your homes will likely appreciate over time. Owning a home has significant long-term investment advantages.

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Buy A Home In Dallas

The best way to navigate a competitive housing market is to work with an experienced professional. Our licensed and knowledgeable real estate agents understand the Dallas real estate market. We’ve helped hundreds of buyers find their perfect home, and we can help you too! Click here to learn more about our complimentary Dallas home locator service, and start searching for your dream property today.