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40-Year Loans And Temporary Buydowns

Christine Stuart
Jul 20, 2023

Carrington Mortgage Services looks to enhance homebuyer affordability.

In a move to tackle the increasing challenges faced by prospective homebuyers due to rising interest rates, continuous home price appreciation, and tightening credit, Carrington Mortgage Services, LLC (CMS), announced its expansion into the 40-year loan market and introduced temporary buydowns.

A tumultuous mix of financial constraints has made homeownership especially challenging for first-time buyers, those with credit hurdles, and individuals with non-conventional income streams. Addressing this, CMS's new offerings are primed to increase both affordability and accessibility for these would-be homeowners.

The 40-year loan offering, while currently not available for conventional and government loans, will be accessible for all of CMS’s Non-QM products including Carrington Flexible Advantage, Carrington Flexible Advantage Plus, Carrington Prime Advantage, and Carrington Investor Advantage. This extension, currently available only for fixed-rate products, sees the traditional 30-year term of a loan stretched by an additional decade, leading to a significant reduction in monthly payments.

“By qualifying borrowers on the reduced payment, not only is their debt ratio optimized, but they also stand to gain more from their property investment without financial overreach," Greg Austin, executive vice president of mortgage lending, said. 

Carrington has also rolled out temporary buydowns for those seeking government and conforming conventional loans. This mechanism allows for a specific period wherein sellers pay upfront into a reserve, effectively reducing both the interest rate and the monthly mortgage installment. For instance, under a 2-1 temporary buydown, a 5% note rate would be reduced to 3% for the first year and 4% for the subsequent year.

Austin further explained the rationale behind this offering, stating, “Temporary buydowns not only enhance the initial affordability for homebuyers but also offer a financial breathing space that might enable refinancing at a lower interest rate in the future.”

Anticipating market shifts, Carrington is also eyeing the extension of temporary buydowns to its Non-QM loan products.

Carrington’s vast portfolio includes ProcessIQ, a system where CMS-approved wholesale brokers can opt for Carrington to manage the loan processing, thus simplifying logistics and borrower interactions. Moreover, CMS’s Second Lien program, introduced in June 2022, offers existing CMS customers a feasible solution to tap into their increased home equity, especially given the rising interest rate scenario.

“Carrington’s unwavering goal is to simplify homeownership, making it both achievable and sustainable. Our newly launched 40-year loan and temporary buydowns underline our perpetual dedication to prospective homebuyers," Austin said. 

Jul 20, 2023
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