Builders use buydown incentives to attract buyers

Three of every four home builders are buying down buyers’ mortgage rates, according to a survey by John Burns Real Estate Consulting. Builders are paying the costs up front by prepaying some of the buyers’ interest on the loan, thereby effectively reducing monthly payments and making the purchase more affordable.

Builders who took part in the survey said incentives are a necessity in today’s sales environment. The most popular promotions seem to be rate buydowns and/or rate locks.

About a third of the builders (32%) indicated they are buying down the full 30-year terms, while another 30% said they are reducing the rate for the first two years of the mortgage. About 13% of respondents identified other less common buydowns.

The researchers from Burns Real Estate said two popular strategies to lower the mortgage rate for the buyer are the 30-year rate buydown and the 2-1 temporary rate buydown.

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