For homebuyers experiencing rising interest rates, decades-long home price appreciation and the tightening of credit availability, these products are right on time.
Carrington Mortgage Services, LLC (CMS), one of the nation’s largest privately held non-bank lenders, boasts an impressive slate of loan offerings and services direct to consumers, investors, mortgage brokers and mortgage bankers nationwide. To improve affordability for homebuyers, CMS has expanded its offerings to include 40-year loans and temporary buydowns.
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“At Carrington, it’s our company’s mission to enable a lifetime of simple and attainable homeownership”
Rising interest rates, decades-long home price appreciation and the tightening of credit availability have all combined to create a perfect storm of challenges to potential homebuyers – especially first-time homebuyers, buyers with challenged credit and those with non-traditional income. With both a 40-year loan product and a temporary buydown program, Carrington provides solutions to offer greater affordability and availability for prospective homebuyers.
The Financial Flexibility of a 40-Year Loan
Although not available for conventional and government loans, the 40-year loan, a sensible option in recognition of prevailing homebuying trends, is available for all CMS non-QM products: Carrington Flexible AdvantageSM, Carrington Flexible Advantage PlusSM, Carrington Prime AdvantageSM and Carrington Investor AdvantageSM. The 40-year term is available for purchase transactions, as well as refinance transactions. For now, the 40-year term is only available on fixed-rate products, but Carrington plans to offer the extended term as an option for adjustable-rate products as soon as possible.
“Instead of the principal and interest payment being based on a 30-year term, the 40-year loan adds an additional 10 years to the term of the loan, taking the monthly payment down and improving affordability for homebuyers who need that longer term,” said Greg Austin, EVP, Mortgage Lending for CMS. “We’re able to qualify borrowers on the lower payment, so in addition to reducing their debt ratio, it helps them buy a little bit more property, or make sure they’re not overextending themselves.”
Temporary Buydowns Provide a Term of Reduced Payments
Carrington also has introduced temporary buydowns for homebuyers seeking Government and Conforming Conventional loans. Temporary buydowns are when up-front funds paid by a seller are deposited into a reserve account to temporarily reduce the interest rate, as well as the effective monthly mortgage payment, for a specific period of time. For example: In a 2-1 temporary buydown, the rate is bought down for the first two years of the mortgage loan. If the note rate is 5%, then the rate is reduced to 3% for the first year, 4% for the second year and then remains at the note rate (5% in this example) for the remaining life of the loan.
“A temporary buydown benefits homebuyers during the first couple years of the loan, providing them with a reduced payment,” said Austin. “For potential homeowners who need more financial flexibility, a temporary buydown can help get these buyers into a home.”
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From a cashflow perspective, temporary buydowns can make a lot of sense. In addition to providing greater initial affordability, the temporary interest-rate reprieve can give homebuyers time for interest rates to drop a bit, at which time they might choose to refinance their home at a lower interest rate. And as the housing market transitions from a purely seller’s market to more of a buyer’s market, some sellers might offer to pay for a temporary buydown to incentivize buyers. For now, temporary buydowns are only available for Carrington’s Government and Conforming Conventional purchase loans, although the company’s future plans include offering temporary buydowns for its non-QM loan products.
Diverse Solutions for Today’s Homebuyers
In addition to Carrington’s non-QM offerings, FHA, VA, USDA and conforming Conventional products, the company’s products include ProcessIQSM, where approved CMS Wholesale brokers have the option of having Carrington process the loan as part of its underwriting. When an enrolled broker submits a loan, they can request that the Carrington ProcessIQ team handle all of the logistics and work directly with the borrower. In June 2022, CMS’ Second Lien program began providing a welcome source of liquidity to existing CMS servicing customers who have seen an increase in the value of their homes, and who now face a rising-interest-rate market in which they may not see a benefit accessing their home equity by replacing a low first-lien rate to obtain a cash out.
“At Carrington, it’s our company’s mission to enable a lifetime of simple and attainable homeownership,” said Austin. “For homebuyers looking for greater affordability, our 40-year loan and temporary buydowns are options that we are proud to offer. These products are another demonstration of Carrington’s unceasing commitment to homebuyers.”
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