Carrington Mortgage Services LLC (CMS), an Anaheim, Calif.-based, privately held non-bank lender, said Tuesday that it has expanded its offerings to include 40-year loans and temporary buydowns.
Citing rising interest rates, decades-long home price appreciation, and the tightening of credit availability, CMS says its new offerings should help potential homebuyers, and especially first-time buyers, as well as those with “challenged credit” or non-traditional income.
Both the 40-year loan product and a temporary buydown program provide solutions to offer greater affordability and availability for prospective homebuyers, the company said.
40-Year Term
Although not available for conventional and government loans, the 40-year loan is available for all CMS Non-QM products — including Carrington Flexible Advantage, Carrington Flexible Advantage Plus, Carrington Prime Advantage, and Carrington Investor Advantage.
CMS said the 40-year term is available for both purchase and refinance transactions, but for now is available only on fixed-rate products. The company said it 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, executive vice president, 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
CMS also 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. If the rate is 5%, then the rate is reduced to 3% for the first year, 4% for the second year and then remains at the 5% rate 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,” Austin said. “For potential homeowners who need more financial flexibility, a temporary buydown can help get these buyers into a home.”
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 mortgage at a lower interest rate.
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, CMS said.
For now, temporary buydowns are available only for Carrington’s Government and Conforming Conventional purchase loans, although the company said its future plans include also offering temporary buydowns for its Non-QM loan products.
“At Carrington, it’s our company’s mission to enable a lifetime of simple and attainable homeownership,” Austin said. “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.”
