With loan originations declining, some lenders are stepping “out of the box,” so to speak, to attract prospective borrowers. A few lenders are offering 1% down payment programs, but what about borrowers who are more concerned with their monthly payment than their upfront costs? Stearns Lending claims to have an answer for that...with a new loan program.
The lender announced recently that it is rolling out a new program called “Stearns Smart Start.” This program features lower monthly payments during the first two years of a borrower’s loan term.
According to Stearns, the loan isn’t an adjustable rate mortgage. Rather, the Smart Start program is a lender-paid buydown of the borrower’s interest rate for the first two years. The program decreases the borrower’s monthly payment without any upfront cost.
“In a rising rate environment, consumers often become more interest-rate sensitive,” David Schneider, Stearns Lending CEO, said. “We want to make sure that higher rates do not deter well-qualified people from reaching their homeownership goals.”
According to Stearns, the program features a 1.5% reduction in the borrower’s interest rate in the first year, followed by a 0.5% reduction in the second year. From then on, the borrower will pay the full monthly amount for the remainder of the loan term.
“Temporarily buying down the interest rate to lower monthly payments for a two-year period can help many homebuyers. This can assist new homeowners as they get adjusted to paying a mortgage. It also may work well for those who expect their income to increase in the relatively near future,” Schneider said.