(source: tips and tricks when buying a home)
Don't Forget to Bargain on Terms:
This is often the case when interest rates are higher and it's difficult for buyers to qualify for mortgages.
The builder may be willing to "pay down" the mortgage by several points. For example, you'll get the mortgage. However, instead of paying the going rate of, say, 9 percent for the first 3 years, you might pay 7 percent, with the builder paying the other 2 percent.
On a $200,000 mortgage, 2 percent points can save you roughly $4,000 a year in interest payments.
But beware of builders who pay down the mortgage just to raise the price by an offsetting amount. In the above example, you would save close to $6,000 over a three-year buy down. But if the builder raised the price of the property by $6,000, where would your savings be? You'd be converting a lower payment into a higher price. And after the first three years, you'd be paying mortgage interest on that higher price.
In most cases, a builder won't buy down an interest rate unless the houses have been sitting around for awhile and interest rates are keeping the buyers away.
TIP---Check For The Original Price
By talking to those who bought six months ago in the same tract, you should be able to establish what the original pricing was. Thus you can determine if the builder has raised the price to pay for your buy down.
]]>
