UWM rolls out new temporary buydown options for jumbo loans

Prime jumbo borrowers now have the option of a 2-1 or 1-1 buydown

United Wholesale Mortgage (UWM) has expanded temporary buydown options for jumbo loans at a time when mortgage rates are still high and borrowers have increased negotiating power. UWM is one of many lenders to roll out temporary buydowns in recent months in a bid to drum up more business.

The Detroit, Michigan-headquartered lender will offer borrowers of prime jumbo loans an option to reduce their mortgage rates by 2% during the first year of the loan and by 1% in the second year with a 2-1 buydown. The other option is to lower their mortgage rate by 1% during the first year with a 1-0 buydown, the firm said Wednesday. 

Borrowers with temporary buydowns funded by a seller or builder pay a lower mortgage rate during the initial period of their loans, and the borrower’s reduced monthly payments are subsidized with money deposited into an escrow account. The escrow account is funded by either the seller or builder via a lump sum payment at closing. 

The lender-paid option, an alternative to seller-paid option, comes with “a loan level pricing adjustment added to the rate to cover the cost of the buydown for the borrower,” UWM said at the time of the roll-out.

Due to current market challenges, sellers are becoming more flexible with concessions in order to help buyers fund monthly mortgage payments. This is happening despite a growing “lock-in effect” – which occurs when homeowners are hesitant to sell because they don’t want to give up their lower mortgage rates. 

“This expansion will allow jumbo borrowers to save significantly on their monthly payments in the first few years, allowing them to use those funds for additional expenses such as furniture or upgrades,” UWM said in a statement. 

UWM initially rolled out temporary rate buydowns in August, with 2-1 and 1-0 buydown options for conventional primary and second home purchases, as well as FHA and VA primary home purchases.

Amid growing competition among lenders, UWM expanded options in November to include 3-2-1 buydowns, 1-1 buydowns, and lender-paid buydowns .

Since September, UWM’s main competitor, Rocket Mortgage, and its wholesale arm, Rocket Pro TPO, has been reducing homebuyers’ monthly mortgage payments by one full percentage point for the first year of their loan.

Rocket Mortgage covers the difference in mortgage payments in the first 12 months through a special escrow account, and home sellers or real estate agents fund the program for Rocket Pro TPO.

UWM’s expansion of temporary rate buydown comes a day after UWM’s chairman and CEO Mat Ishbia confirmed that he was buying the Phoenix Suns basketball team.

Ishbia and his brother Justin bought the franchise — which includes the Phoenix Suns and the Phoenix Mercury WNBA team — in a deal valued at $4 billion, giving the brothers a majority stake of the Suns and the WNBA’s Mercury.

The CEO said in a statement that he will “continue building UWM day to day alongside the current leadership team, stay rooted in the local community and advocate for Independent Mortgage Brokers nationally.” 

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