For a non-conforming loan, cost is typically in the range of 2% to 3% of the loan amount. The seller, builder, or broker can contribute towards the buydown. In many cases, the borrower is able to qualify at the buy-down rate.
It is difficult for me to recommend that sellers finance seconds for their buyers. Here are a couple of issues:
- What is the buyer's 1st lien lender forecloses? Chances are the second lien is going to be wiped out in the process.
- Very little underwriting/review of the buyer's financials takes place. Do you know if the borrower can truly repay you?
- Servicing is a problem. Seller has to collect the payment, apply them, issue payoff demands, etc. Sure, you can outsource/sell the servicing, but that is an added expense.
-Aaron Wheeler, President, Oakville Properties & Oakville Capital