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Temporary Buydowns

Temporary buydowns are great solutions for buyers looking for a lower payment for those first few years. A temporary buydown fee can reduce the rate by 3%, 2% or just 1% per year.

For example, on a 2/1 buydown rate is reduced by 2% in the first year and 1% in the second year, then remains at the note rate for the remaining life of the loan for fixed-rate loans. These buydowns work great when the seller provides sales concessions to assist in the buydown program.

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Buydown mortgage rates with temporary payment reductions.
Learn how temporary buydowns can lower your mortgage payments during the initial years of homeownership.

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Product highlights

  • 3/2/1 buydown, 2/1 buydown or 1/0 buydown options available
  • Available on most Conventional, FHA, and VA loans
  • Purchase transactions for primary and second homes only
  • Seller, builder, or lender must fund the buydown
  • Borrower’s rate cannot increase more than 1% per year including the buydown annual increase
  • Borrower qualifies for monthly payment at the note rate (if a fixed rate) not the temporary rate reduction
Borrower advantages
  • Frees up cash in the beginning of the loan, allowing buyer to ease into monthly payments
  • Extra cash is particularly handy for costs after purchasing a home (furniture, landscaping and home improvements, etc.)
  • If paid off through a sale or refinance, any remaining buydown fees are returned and paid against the balance
Realtor advantages
  • Provides the ability to offer an incentive to buyers without lowering the list price
  • Seller can buydown the rate for their buyer and create an optimal solution
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