A conversation with Fairway Branch Manager Paige Bowman on when an interest rate buydown works best, and how she starts the conversation with prospective buyers and Realtors®.
Fairway Branch Manager Paige Bowman knows that potential homebuyers have more hurdles in front of them on their path to homeownership than in recent years. Many don’t have a huge pile of cash on hand to bring to the closing table. Others are very conscious of an affordable maximum monthly payment amount.
In an environment where mortgage rates seem to have settled in the mid-to-high 6’s and inventory remains a potential issue, buying that first home or moving up with a growing family requires a lot of planning. It requires strategy. This is not the Wild West, but with all the loan programs that Fairway has at its disposal, many are still making it happen.
It takes a savvy loan officer with a lot of tools in his or her toolbelt. It requires the market knowledge to know that not every homeowner is a nail — and not every home loan program is a hammer. Getting families into the home they deserve takes nuance and maneuverability, not a bank of phones with as many salespeople pitching into them.
We spoke with Paige about how she uses interest rate buydowns* and other tools at her disposal to make the most of today’s market and put as many families as possible into homes despite market volatility.
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When I’m talking to the client it all starts with payment, and how we get the monthly mortgage payment where they need it to be. I talk to them about what’s more important in their scenario — cash to close, monthly payment or a mixture of the two. It’s all important, but one is usually more important from an affordability standpoint than the other.
If someone tells me that monthly payment is important, but they want is this or that feature or amenity, and those don’t compute into their preferred monthly payment, that’s when I bring up the buydown options. I’ll bring up along the lines of, “Look, your market rate is 6.99% but we do have the ability to get your rate down for either one, two or three years, and that gives you the ability to move into a home, knowing that you’re comfortable with this payment, and then it stair-steps to what your permanent monthly payment will be.”
In those one, two or three years, they’re building equity and at the end of the buydown period we can look at getting mortgage insurance off the loan through a refinance or if rates have dropped in the meantime, refinancing into a lower rate and payment if that’s a possibility at that time.
The average consumer is going to save anywhere from$200-$300 per month for every percent that comes off from the buydown. On an average home, maybe $400,000 for the sake of a scenario, on a 1/0 buydown, Ican tell them that they might be looking at $200-$300 per month in savings on that mortgage payment for the first year of the loan term. If their goal payment is $2,000 but the payment under the mortgage they’re qualifying for is$2,200 then I might say, “Hey, let’s do a 1/1 or a 1/0 buydown,” so we can get their payment $200-$300 cheaper for one or two years.
If their goal payment is $2,000 but their qualifying payment is $2,400, that’s when we might mention the 2/1 buydown to try to help them get more comfortable.
The buyer can pay for the buydown at closing, sometimes we’re able to negotiate to get the seller to pay for the buydown, or in some cases we can do a lender-paid option. It’s very case-by-case and dependent on negotiations with the seller’s agent. Or it can be a mixture of from the buyer and seller. What they’re in essence doing is pre-paying those interest savings up front at closing to get the introductory rate down at the beginning of the loan term — either for 12, 24 or36 months.
If we issue a pre-approval letter and we’ve talked about a2/1 buydown up front and we know the cost of that — say it’s $12,000 — we tell the buyer’s agent, “Hey, our buyer needs $12,000 of concessions in every offer they submit. That’s going to get them into a payment where they can buy.”
These come on a promotional basis. June is National Homebuyer Month and so we’re going to be running a promotion for a 1/0lender-paid buydown, and that way, we pay for the buydown for the client. One loan is better than no loans. I have an abundance mindset rather than a scarcity mindset. I’d rather have five families served this way than no loans completed and no families served.
NOTE: The June National Homebuyer Month promotion Paige and her team are running is only available at her branch in Houston, Texas. Please ask your local Fairway mortgage advisor about their current program offerings and promotions.
All my agents know exactly what these programs and promotions are because I educate them. Educating a real estate agent on these programs is not as hard as a lot of loan officers think it is. Prior to me mentioning a buydown as a possibility, probably none of them had ever heard of the idea. Post-Covid is really when it came into play. It was more in play in the90s and early 2000s, but it dissipated because rates calmed back down. We’re trying to be as responsive to market conditions as we possibly can be and help as many homebuyers get into homes as possible in the process.
It all comes down to strategy. If a buyer comes to me or is interested in a buydown, it’s because their agent has said, “Hey, Paige has something that can help you for your first one, two or three years owning this home that could reduce your monthly mortgage payment and help you afford this home you’re looking at.”
Obviously, the client has to qualify based on the full payment. Loan qualification is based on the permanent payment, not the introductory payment.
Most people are not as payment-shocked anymore. They’re not as shocked that interest rates are where they are at this point. We’ve been in the current rate environment since 2022. Yes, there are fluctuations, but we’ve been holding in mid-to-high 6’s. Most of my clients now are more concerned about cash to close than they are monthly payment.
I don’t think as many people sell this as an option as should. This is a tool that can start the homebuying conversation, ultimately. When we start the conversation, we’re able to get into the reality of what kind of home the buyer is actually looking for and what programs will fit their needs financially. We’re always looking for the best way to get to affordability. There are ways to make home-buying affordable. It’s all about your strategy.
If monthly payment is the most important thing to them, then a buydown is a good strategy, and we’ll walk them through what that looks like, how it works and begin negotiating with the seller’s agent to that end.
If a buyer is comfortable with a little bit of a higher payment but needs the cash to close to be under $10,000, then what I’m hearing is that, although the buydown was the conversation starter, what you really may benefit from is down-payment assistance. If they bring a little more to the closing table but they have a stricter requirement on monthly payment, then I might say, hey, great, maybe the seller will negotiate a buydown so your monthly payment is lower the first couple of years.
We have more inventory now than we’ve had on hand for years. Sellers are willing to negotiate. Homes are in general, with exceptions, on the market for somewhere in the neighborhood of 45 days in my market.
Fairway offers so many products. What becomes important is knowing and reacting to what the buyer needs to get the deal done.
I’ve always been big on strategy. Make it make sense. Bobbing and weaving. The market during Covid was completely different than itis today. I’m lucky to be at a place like Fairway that bobs and weaves and has multiple options to help bring people into homeownership. More consumers now than ever have less and less money in their bank account than I’ve previously seen. So the name of the game becomes trying to figure out what works for them. Coupling all the resources available to them. Concessions from the seller, a buydown, down-payment assistance.** You combine these things and strategize with each buyer you serve to help them get into the home they want and deserve.
My clients, more and more, say they need to be able to bring as little money as possible to the closing table, and so we look at how much they can bring to the table, look to the seller to cover some or all closing costs, look into down-payment assistance and combine these tools in a way that makes the most sense for each buyer we serve. And if the conversation becomes about down-payment assistance programs, Fairway has tons of options available, so then we dive into which specific programs make the most sense in each buyer’s case.
A lot of sales is just reading the room. We can’t have one thing that we’re really good at. We have to be really good at a lot of things to get people in the door. You need a reduced interest rate? You need reduced cash to close? We’re solutions oriented.
Most people from a cost perspective end up going with the1/0, the 1/1 or the 2/1. You can only get so much from the seller. A 3/2/1 can cost $20,000-$40,000, so that money has to come from somewhere. Most sellers aren’t willing to go that far on their own.
The bottom line is that homebuyers deserve a loan originator who is in their corner — one willing to do the legwork to craft a homebuying plan that suits that buyer, and then be willing to do the work all over again to tailor the next deal to fit a completely different buyer profile. At Fairway, we’re proud to put in the work required to get our clients to the finish line.
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*Not all temporary buydown options are available for every product or scenario. Talk to your Fairway loan officer for more details. A 3 year (3/2/1) temporary rate buydown will reduce the note rate by 3% for the first year of the term, followed by a 2% reduction of the note rate for the second year of the term, followed by a 1% reduction of the note rate for the third year of the term, after which the rate will then revert back to the original note rate for the remainder of the term. A 2/1 temporary rate buydown will reduce the note rate by 2% for the first year of the term, followed by a 1% reduction of the note rate for the second year of the term, after which the rate will then revert back to the original note rate for the remainder of the term. A 1/0 temporary rate buydown will reduce the note rate by 1% for the first year of the term, after which the rate will revert back to the original note rate for the remainder of the term. **Eligibility subject to program stipulations, qualifying factors, applicable income and debt-to-income (DTI) restrictions, and property limits. Copyright©2025 Fairway Independent Mortgage Corporation. NMLS#2289. 4750 S. Biltmore Lane, Madison, WI 53718, 1-866-912-4800. All rights reserved. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates, and programs are subject to change without prior notice. All products are subject to credit and property approval. Not all products are available in all states or for all dollar amounts. Other restrictions and limitations may apply. Fairway is not affiliated with any government agencies. Fairway is required to disclose the following license information. AZ License #BK-0904162; Licensed by the Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act, License No 41DBO-78367. Licensed by the Department of Financial Protection and Innovation under the California Financing Law, NMLS #2289. Loans made or arranged pursuant to a California Residential Mortgage Lending Act License; Georgia Residential Mortgage Licensee #21158; For licensing information, go to www.nmlsconsumeraccess.org; MA Mortgage Broker and Lender License #MC2289; Licensed Nevada Mortgage Lender; Licensed by the NJ Department of Banking and Insurance; Licensed Mortgage Banker-NYS Department of Financial Services; Rhode Island Licensed Broker & Lender; Fairway Independent Mortgage Corporation NMLS ID #2289 (www.nmlsconsumeraccess.org). Equal Housing Opportunity.
