Freddie Mac Single-Family Seller/Servicer Guide 4601.1 — Financed Permanent Buydown Mortgages

Freddie Mac Single-Family Seller/Servicer Guide 4601.1 — Financed Permanent Buydown Mortgages

Effective 2025-07-02 · Freddie Mac's stamp for this section

A Financed Permanent Buydown Mortgage is a Mortgage for which the Borrower has permanently reduced the interest rate by financing discount points in the loan amount. This section contains requirements related to: ■ Eligible Financed Permanent Buydown Mortgages ■ Ineligible Financed Permanent Buydown Mortgages ■ Underwriting Financed Permanent Buydown Mortgages ■ Calculation of applicable Credit Fees for Financed Permanent Buydown Mortgages (a) Eligible Financed Permanent Buydown Mortgages The Mortgage must be an eligible fixed-rate, level-payment Mortgage or a 5/6-Month, 7/6Month or 10/6-Month ARM. (b) Ineligible Financed Permanent Buydown Mortgages Financed Permanent Buydown Mortgages must not be: ■ Community Land Trust Mortgages ■ Government Mortgages ■ HeritageOne® Mortgages ■ Home Possible® Mortgages ■ HomeOne® Mortgages ■ Mortgages with a temporary subsidy buydown ■ Secured by property subject to income-based resale restrictions that terminate upon foreclosure (or expiration of any applicable legally required foreclosure redemption period) or recordation of a deed-in-lieu of foreclosure, where the property value must be determined in accordance with Section 4406.4(c) (c) Underwriting Financed Permanent Buydown Mortgages For purposes of this chapter, the following definitions apply: Defined terms for Financed Permanent Buydown Mortgages B Base Mortgage Amount The Mortgage amount without the financed discount points G Gross loan-to-value (LTV), total LTV (TLTV) and Home Equity Line of Credit (HELOC) TLTV (HTLTV) ratios The LTV, TLTV or HTLTV ratio calculated using the Mortgage amount, which includes the financed discount points Eligibility of Financed Permanent Buydown Mortgages is determined using the Gross LTV, TLTV and HTLTV ratios. Financed Permanent Buydown Mortgages must comply with the following requirements: 1. The Gross LTV, TLTV and HTLTV ratios must not exceed the LTV, TLTV or HTLTV ratios specified in Section 4203.1(b) 2. The amount of the mortgage insurance coverage must meet the coverage level requirements in Section 4701.1, using the Gross LTV ratio 3. The maximum amount a Borrower can finance for a permanent buydown is three discount points, calculated based upon the Base Mortgage Amount 4. For fixed-rate Mortgages, Borrower qualification is based on the monthly housing expense-to-income ratio calculated using the monthly payment at the permanent bought down Note Rate. For ARMs, Borrower qualification is based on monthly payments calculated in accordance with Section 4401.2. 5. For ARMs, the permanent buydown is in effect for the initial Note Rate and each Note Rate adjustment for the entire term of the Mortgage. The Lifetime Ceiling will be calculated using the permanent bought down initial Note Rate. The permanent buydown does not affect the Margin, Initial Cap or Periodic Cap. (d) Calculation of applicable Credit Fees for Financed Permanent Buydown Mortgages Applicable Credit Fees will be assessed and billed based on the UPB of the Mortgage (including the financed permanent buydown points) and the Gross LTV ratio. The Seller must refer to Exhibit 19, Credit Fees. Credit Fees are paid in accordance with the Credit Fee provisions stated in Chapter 6303.

Source: Freddie Mac Single-Family Seller/Servicer Guide 4601.1 — Financed Permanent Buydown Mortgages · source URL · snapshot 4c94f67729042dd6