General Mortgage KnowledgeQuestion 164 of 400
A note rate is 6.50%. During the first year of a 2-1 buydown, what rate does the borrower pay, and what rate applies in year two?
a.6.50% then 5.50%
b.3.50% then 4.50%
c.5.50% then 6.50%
d.4.50% then 5.50%
Explanation
A 2-1 buydown lowers the rate 2% in year one and 1% in year two: 6.50% - 2% = 4.50% (year one), then 6.50% - 1% = 5.50% (year two). The note rate 6.50% resumes in year three.
Practice all 400 questions free — no signup required.
Related questions on this topic
- P&I is $900/month, annual taxes are $2,400, annual insurance is $1,200, and there is no PMI. What is the monthly PITI?
- On a $180,000 loan, a borrower pays 2.5 discount points. What is the cost?
- A 5/1 ARM starts at 3.50%. At the first adjustment the index + margin equals 6.25%, and the initial cap is 2%. What is the new rate?
- On a $400,000 FHA purchase with the minimum down payment, what is the maximum base loan amount (before financing UFMIP)?
- A loan balance is $150,000 at an annual rate of 4.8%. How much of the next monthly payment is interest?
- A home is worth $450,000. A borrower wants a first mortgage of $315,000 and a second of $22,500. What is the CLTV?
Last reviewed: · editorial process
PrepPass Editorial Team · Verified against NMLS SAFE Mortgage Loan Originator National Test · How we review