Dec 20, 2022 2022-27

Updates regarding 2-1 Buydown Option & FHA Private Flood Insurance

2-1 Buydown Option (2-1 Buydown)

We have received inquiries regarding the acceptance of the 2-1 Buydown option within Housing NM’s single-family programs. 

The 2-1 Buydown is a financing tool that allows the borrower to reduce their interest rate on their first mortgage for the first two years. This temporary buydown reduces the interest rate by 2 percent in the first year and 1 percent in the second year. In year three, the interest rate resumes the contractual note amount.

Housing NM’s ability to issue Tax Exempt Mortgage Revenue Bonds has allowed us to publish highly competitive mortgage rates which, recently have been below local market rates.

Housing NM is currently not accepting variable rate products including the 2-1 Buydown within our single-family programs. 

FHA Private Flood Insurance 

FHA recently announced a positive change allowing Private Flood Insurance on FHA insured mortgages for properties located in a Special Flood Hazard Area. 

Housing NM is pleased to announce that we will accept private flood insurance as outlined in the final rule.

The following represents the maximum deductibles accepted by Housing NM. It is important to note that participating lenders are required to follow current agency guidelines regarding insurance deductible requirements for the loan type that is being delivered.  Housing NM will not authorize the loan purchase of unsalable loans.

Housing NM’s current insurance deductibles are outline below:

FLOOD INSURANCE:

Minimum coverage amount: Equal to the loan amount or replacement cost.

Maximum deductible amount: $5,000.00

HAZARD INSURANCE:

Minimum coverage amount: Equal to the loan amount or replacement cost.

Maximum deductible amount: 2% or $2,500.00, whichever is greater.

WIND/HURRICANE INSURANCE:

Minimum coverage amount: Equal to the loan amount or replacement cost.

Maximum deductible amount: May not exceed the higher of 2% or $2,000.00 of the face amount of the dwelling coverage.

When purchasing hazard insurance policies, borrowers should carefully consider the cost of insurance premiums and the insurance deductibles, based on their unique financial circumstances. This would include the need to consider their ability to pay high deductibles should they need to make a claim.

We appreciate your understanding and continued support.

Should you have questions please contact a member of the Homeownership Department at 505.843.6880.

Thank you for participating in Housing NM programs.