10/19/2023 – Permanent Buydowns

I want to give a big, hearty thank you to everyone who graced us with their presence at our Oktoberfest bash last night! We were thrilled to see more than 350 of you lovely folks turning our office backyard into a mini Bavarian paradise. Your attendance truly made the night unforgettable, and we promise we didn’t just appreciate it; we raised a giant pretzel to salute you!

Now, let’s dive into the mysterious world of interest rates - the stuff of both financial witchcraft and nightmares. Some folks keep whispering about “buying rates down,” last week, we gave Temporary Buydowns a spin. This week, we’re unraveling permanent Rate Buydowns.

Imagine you’re eyeing a house with a 25% down payment on a $800,000.00 home. Your credit is so good that it practically does your taxes for you, and you’re not spending points like a contestant on a game show. The regular interest rate stands at approximately 7.99%. Anything lower than that is your golden ticket to the Permanent Buydown party.

Here comes the punchline: Points in the mortgage world are like that side dish you didn’t order but somehow ended up on your plate. One Point equals 1% of the loan amount but is not 1% off of your interest rate. It’s like expecting a piece of broccoli to taste like a chocolate truffle.

So, let’s break it down with some wit:

• Purchase Price: $800,000.00
• Loan Amount: $600,000.00

Interest Rates (with the accompanying Points and Monthly Payments):

• 7.990% – 0 Points – $4,398.41
• 7.625% – 1 Point – $4,246.76
• 7.250% – 2 Points – $4,093.06
• 6.990% – 3 Points – $3,987.79
• 6.750% – 4 Points – $3,891.59
• 6.625% – 5 Points – $3,841.87
• 6.375% – 6 Points – $3,743.22
• 6.250% – 7 Points – $3,694.30

In the current housing market, some homes are flying off the shelves faster than discount candy on November 1st. But if your property is sitting on the market like that leftover Halloween candy, it’s time for a strategy. You have two options: offer to buy down the interest rate or lower the property price.

If I were the buyer, I’d be tempted by the 2/1 Buydown like a kid in a candy store. I get a sweet 5.99% rate for the first year, a 6.99% delight in year two, and a 7.99% dessert from year three onwards. With the Permanent buydown of the same 3 points, I get the lifetime membership to the 6.99% club. Not a bad deal, right? OK, maybe not, but get used to it! LOL

If you’re selling an $800,000.00 property, parting with $18,000.00 to spice things up sounds good. It’s like adding extra cheese to your nachos - always a good call! If your property is sitting, you need to do something, and if you have low offers, a buydown could fill the gap!

Condo / Townhome issues we know of now:

1. American Beauty Village – Insurance
2. Scenic Hills – Insurance
3. Mariposa – Litigation – Agreed upon, but not yet recorded
4. Bouquet Canyon Village – Insurance
5. Madison – Litigation
6. West Creek / West Hills – Insurance
7. Cornerstone – Insurance
8. Canyon Oaks – This is new!!!
9. Brookside Walk – Insurance – NEW!!!

Please let me know if you hear something new on Condos or Townhouses. We will see premiums increasing, likely increasing the HOA Fees soon!

They should ban economic news for a while until we can get these rates under control. Yesterday, it was the money we gave to Palestine and Israel; Today it’s unemployment and Jerome Powell opening his mouth!

• 12-day escrows if your buyer is pre-approved - Conventional / FHA / Jumbo / Bridge
• We do loans in all states, so call me with anything you need.  
• Government Loans (FHA / VA) are in the high 6’s and low 7’s
• Conventional Loans up to $726,200.00 are in the high 7’s and low 8’s.
• High Balance Loans $726,201.00-$ 1,089,300.00 are in the 8’s
• Jumbo loans above $1,089,300 are in the 7’s and 8’s
• Bank statement loans - They are available with 10% down again! 8’s and 9’s depending on down and credit score.
• No income qualifier – 40% down with reserves! In the 6’s!
• 0 down loans are in the high 7’s – 660 credit score min right now, up to $740,000.00.
• Private Money lenders - hard Money Loans – 35% down!
• No Ratio Loans 30% down
• Debt Service Coverage loans with as little as 25% down
• Bridge Loans - are typically 8.49% with limited fees – But they get you where you need to go!
• 0 down California Dream for all Equity Share – Postponed until October???
• 3/2/1 Buydowns 2/1 Buydowns and 1/0 Buydowns are available at great start rates!

Interest rates are subject to change without notice! Above are LA County Loan Limits.

I am around all week if you have any questions or if someone is interested in buying a property! My cell is 661-714-6258, and my office line is 661-260-2970 ext. 2222. Please text me at 661-714-6258 or email me at Mike@AugustaFinancial.com. Have a great day and a better tomorrow! Please call me when you have a client that needs to borrow!