What Is an Interest Rate Buydown — and How Does Davidson Homes Help?

If you've been watching mortgage rates in the news and wondering whether now is the right time to buy, here's something worth knowing: the rate you see in the headlines isn't necessarily the rate you may qualify for on your new Davidson home.

That's the message a Davidson Homes Mortgage Loan Officer shares in the latest installment of The Davidson Difference video series — and it's worth understanding as you weigh your options for buying a new construction home.

What Is an Interest Rate Buydown?

A buydown is a financing structure in which funds are paid upfront — at or before closing — to reduce the interest rate on a mortgage loan. A reduced interest rate generally results in a lower monthly principal-and-interest payment.

Buydowns come in a few common forms:

Permanent buydowns reduce the interest rate for the full term of the loan. Funds (commonly referred to as "discount points") are paid at closing to lock in a lower rate.

Temporary buydowns (such as 2-1 buydowns) reduce the interest rate for the first one or two years of the loan, after which the rate adjusts to the agreed-upon note rate. These can be useful for buyers who anticipate income changes in the near future.

The right structure for any individual buyer depends on credit profile, loan program, length of expected homeownership, and other personal financial factors. A licensed mortgage professional can walk you through the specifics. To explore which loan programs may apply to your situation, Davidson Homes Mortgage offers a range of options for new construction buyers.

The Davidson Difference: Builder-Paid Buydowns May Be Available

One thing that sets Davidson Homes apart is its affiliated mortgage company, Davidson Homes Mortgage. Through this relationship, Davidson Homes may offer builder-paid buydowns on eligible homes and loan programs — meaning Davidson Homes may contribute funds at closing toward reducing the buyer's interest rate.

Builder-paid buydowns are not available on every home, every loan program, or in every community, and availability is subject to change. Eligibility depends on the specific home, the loan program, the buyer's qualifications, and current promotions. Your Davidson Homes New Home Consultant and a Davidson Homes Mortgage Loan Officer can confirm what may be available on a specific home you're considering.

Why This Matters

Mortgage rates have been a focus for homebuyers in recent years, and many prospective homeowners have paused their plans over concerns about monthly payments at current rates.

A builder-paid buydown — where available and on eligible loans — can be one tool in the conversation about how a new construction home fits into your budget. The only way to know what's possible for your specific situation is to speak with a licensed mortgage professional who can review your goals, your finances, and current program availability.

Questions Worth Asking a Mortgage Professional

A buydown is one of several financing options, and it isn't a one-size-fits-all solution. Here are a few questions worth discussing with a licensed loan officer:

• How long do you plan to stay in the home?
• How do you expect your income to change over the next few years?
• What is the total cost of the buydown, and how does it compare to the projected monthly savings over the time you plan to own the home?
• What other loan programs and rate options are available for your situation?

A licensed Davidson Homes Mortgage Loan Officer can walk you through your options and help you understand which structure may best fit your goals.

Watch the Video & Learn More

To hear directly from a Davidson Homes Mortgage Loan Officer on how builder-paid buydowns work, watch the full video here.

Ready to explore your options? Contact a Davidson Homes New Home Consultant or connect with a Davidson Homes Mortgage Loan Officer to discuss what's available for your specific situation.

Davidson Homes Mortgage, LLC (NMLS #1773914) is a licensed mortgage lender. Davidson Homes Mortgage and Davidson Homes, Inc. have a corporate affiliate relationship; both companies are owned by Davidson Homes Group, the parent corporation. Because of this relationship, your use of Davidson Homes Mortgage may provide a financial or other benefit to Davidson Homes, Inc. You are NOT required to use Davidson Homes Mortgage as a condition of the purchase of a Davidson Home. There are other mortgage lenders available who may also serve your financing needs.

All loan products are subject to credit approval, income verification, property appraisal, and applicable underwriting guidelines. Interest rates, loan terms, points, fees, and program availability vary based on individual qualifications, loan program, property type, and market conditions, and are subject to change without notice. The terms and structure of any buydown depend on the loan program, lender approval, and current promotions, and not all buyers, homes, or loan programs are eligible. This content is for general informational purposes only and does not constitute a commitment to lend, an offer of credit, or a guarantee of any specific loan terms, interest rate, payment amount, or savings. Please contact a licensed mortgage professional to discuss your individual situation.

Davidson Homes is an Equal Housing Opportunity builder. Davidson Homes Mortgage is an Equal Housing Lender. We do not discriminate on the basis of race, color, religion, sex, handicap, familial status, national origin, or any other class protected by applicable federal, state, or local law.