Dealer Buydown

[Boltzinator]

For my work (with a consulting company), I'm trying to understand the mechanics of the dealer buydown process.

Does the dealer communicate the buydown during the initial application? And/or does the dealer submit a contract with a rate below the underwriter approved rate?

How does the dealer pay for this? Does it come out of their reserve or participation? If so, what happens when the buydown fee exceeds the dealer reserve/participation for the deal?

Any info would be appreciated! Thanks!!!