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Is it possible to "buy down" your interest rate on a VA loan?

by jeffroller7303 from San Antonio, Texas. Apr 16th 2018 Reply

William J Acres (William_Acres)
#73 ranked lender in Arizona - 8,728 contributions

Yes.. but it typically does not pay to buy down your rate.. Example: Your buying a $300K home, and you can get 4.625% at no cost, but if you pay 1.25% origination ($3750), you can get 4.375%. this lowers your payment $44. If you take the $3750 cost, and divide it by $44 per month savings, you get 85. This means you need to make 85 payments at a $44 per month savings to "Pay back" the cost of $3750.. every payment after that is true savings.. So, you pay $3750 and it takes over 7 years to pay itself back.. This is not financially prudent. However, if you are purchasing a home and the seller is contributing towards your closing costs, but you do not have enough in costs to use up all your seller concessions, then it makes sense to use those extra funds to buy down the rate.. because, if you don't use all the seller concessions, you have to give back the unused portion to the seller.. so, use it or lose it! Also, with VA, if you choose to buy down the rate, you cannot finance it.. it has to be paid for upfront. I'm a preferred Lender with California and Arizona being my primary markets. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 NMLS# 226347 / RPM Mortgage NMLS 1541014 / AZMB0121893

Apr 17th 2018
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