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Non-QM Lender Newrez Offers Temporary Buydowns

David Krechevsky
Nov 18, 2022
Newrez new logo.

Options offer borrowers a reduced interest rate in first years of a loan.

Non-QM lender Newrez recently announced a temporary rate buydown for its Non-QM products, known as “Smart Series.”

The Fort Washington, Pa.-based lender now offers Non-QM borrowers four different options for temporarily reducing the rate on their mortgage. 

Newrez officials did not immediately reply to a request for comment.

A buydown temporarily reduces the rate for the first one to three years of the loan, lowering the monthly mortgage payments.

According to information posted on its website, Newrez offers four different types of buydowns:

  • 1-0: Reduces the rate by 1% in the first year of the mortgage.
  • 1-1: Reduces the rate by 1% in the first and second years.
  • 2-1: Reduces the rate by 2% in the first year and by 1% in the second year.
  • 3-2-1: Reduces the rate by 3% in year one, 2% in year two, and 1% in year three.

An example provided by the company on its website shows that a Non-QM borrower with a $100,000 loan at a 5% interest rate utilizing the 2-1 buydown would save $1,380 in mortgage payments in the first year and $720 in the second year, for a two-year savings of $2,100.

Restrictions apply to the buydown options. Newrez said the 3-2-1 buydown is allowed for conventional and VA loans, while the 2-1 buydown is allowed for FHA and USDA loans, and the only fixed-rate mortgages are eligible. The buydowns are available only for purchase transactions involving one to four units, and require a minimum FICO score of 660. Mortgages on primary and second homes are eligible, but are not allowed for manufactured homes.

This announcement follows Newrez’s announcement in September that it will offer a 40-year mortgage featuring a fixed-rate and interest-only payments for the first 10 years before the loan turns into 30-year, fixed-rate mortgage with monthly interest and principal payments.

The 40-year, interest-only option applies to Newrez’s “Smart Series Non-QM products” and is available across all of the company’s lending channels (Retail, Wholesale, Correspondent, Joint Venture, and Direct to Consumer).

Published
Nov 18, 2022
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