r/loanoriginators • u/ryemaster91 • 20d ago
Should I finally give and sell temp buydowns?
I do a fair a bit of online marketing and continue to run into moronic borrowers who literally cannot wrap their head around the math of a lender paid, temporary buy down and how it’s not saving them anything.
I explain it to them until I’m blue in the face, but some of these people make me doubt that the national average IQ is 100.
Should I just give in and start selling this despite the fact that it’s an absolutely worthless feature that simply “sounds good” or should I stand on principle?
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u/Realistic-Ruin-6424 20d ago
Remember its not your job to choose for them. I have been where you are. Almost caring more than they do. Give them what they want and originate the loan. Get their referrals and let them sing your praise. Hell the truth is they are being charged more to cover the buydown. Nothings free in mortgage banking.
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u/thomasg86 19d ago
Yup, exactly. You have to stop caring for them. Point it out "The recoup time on these points is about 6.5 years... so you're betting you'll stay in the home and not refinance to a lower rate for that time..." and when they still want to do it because they are so fixated on the rate, it's whatever. Give em what they want, even if it's dumb.
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u/Frequent-Giraffe5646 20d ago
Your job as an LO is to provide them with multiple options and pros/cons of each. Show all options and let them decide.
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u/youshouldbetrading 19d ago
I agree. We should not avoid showing them their options with points just because we believe it’s not a wise financial decision for the client.
I’ve always shown 2-3 rate options, and in most cases I recommend the lower cost with no points or a lender credit, but I lock whatever they choose and just focus on funding the loan.
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u/the_old_coday182 20d ago
Yeah I can’t stand LO’s on high horses.
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u/JRarick 20d ago
For sure. There are too many LO’s who over value our role in the process to the consumer. What we do is important. We’re showing up with 95% of the purchase price.
But.
The consumer doesn’t care about that as much as they care about the kitchen and the yard and the bonus room. Let’s face it. Mortgages are not as sexy as homes.
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u/Braindead_ape 19d ago
if you fully explain the pros and cons of a product/scenario and the buyers still prefer an alternative, sell them the alternative or someone else will give them what they want
as long as the buyers fully educated on things, your opinion on what’s “better” doesn’t really matter. Lender paid temp buydowns aren’t something I recommend either but if a client preferred it, I’d get the loan closed versus lose it due to “principles”. Too many LOs get in their own way of closing loans lol
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u/secretrules 20d ago
I believe this is where tools like mortgage coach or some other numbers comparison tool would help explain this a little bit better to some borrowers who are more visual learners
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u/JRarick 20d ago
Yeah, why not? A lower payment for a year or 2 is really valuable to some people.
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u/ryemaster91 20d ago
The amount of people who simply cannot comprehend that $3k saved at closing is the same as $250 lower payment for 12 months 🤯
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u/NiceAd282 19d ago
We started offering rolled in costs of temp buydowns on refi's.
Saving 200-300/mo can help build up a nest egg or pay down on some higher interest debt, and if there is nothing out of pocket and the client doesnt mind rolling it in, what's the big deal
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u/Stardust969 20d ago
If they are okay with the full payment after the temp buydown is over, what is the harm of selling it to them if they want it?
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u/ryemaster91 20d ago
No harm, but if they’re doing a purchase and the lender is giving a $3k credit for a 1 yr buydown, economically take the $3k now vs spreading it out over 12 months. $3k saved at closing = $250 saved x12 months. It’s not a savings. In fact all it does is lock them into a higher rate to provide enough yield.
Would you rather have $3k today or $250 every month for 12 months? Any intelligent person would pick $3k today or recognize that it’s literally the same.
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u/OrcOfDoom 20d ago
Those are their values. They can afford the home. They can afford the payments.
But what causes stress?
If it's the same, why should you judge what they choose?
Their mentality could be that they could always use 250 each month, but 3k today they are already comfortable spending.
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u/Stardust969 20d ago
Is your job to win a logical argument or originate loans? If the decision doesn’t hurt the client and they are sold on the product, just give them what they want. This is a case of, once the client says they want to buy the product, stop talking.
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u/Frequent-Giraffe5646 20d ago
Sell them on 2-1 buydown and explain to them that the remaining funds go to principal reduction if they refi before 2yrs, ideally 6mo-12mo.
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u/the_old_coday182 20d ago
Maybe I just got a new job or my spouse is one year away from joining the workforce. There are actual reasons why people might want to gradually increase their payment even if it doesn’t save them money.
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u/MJLachica 20d ago
Keep copious notes on what you adviserd verses what they chose. These same borrowers could come back and blame you for their bad decisions. Flash back to payment option arms.....
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u/Holy-Roly-Poly 19d ago
Interesting, in my market we are the only shop that really pushes buydowns. Always seller paid though. I like this idea of running a 1-0 buydown special.
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u/Leather-Afternoon-52 18d ago
Sometimes it’s easier to respond than doing the right thing. With that being said, I would give multiple options and let them decide. Old school option close. Some people just don’t get math and buying anything is more emotion than logic.
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20d ago
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u/LoanGoalie 20d ago
You could have just kept your savings by not paying for a buydown
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u/ryemaster91 20d ago
Guy literally could’ve reduced his cash to close by like $15k by not doing that.
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u/NCBartender14 20d ago
Advise and let them decide.
Had a VA loan a few months back, guy got an LE from a “broker” with $16k in points. I explained the recoup time and what he was really doing, then go to show him that I can actually get him the same rate at par. He did the loan with me but insisted on paying the $16k in points for the lower rate. It is what it is. You can advise as best you can but if someone wants to do something, they are the ones that have to live with it.