Lower payments early on - purchases only
Temporary Buydown
Start with a lower interest rate for the first year or two, then step up to your permanent rate - common structures include 3-2-1, 2-1, and 1-1 buydowns.
A temporary buydown lowers your interest rate - and monthly payment - for the first year or two of your loan, before stepping up to your permanent, fixed rate for the remaining term. It’s available on purchase loans only.
The most common structures are named for how the rate steps down each year. A 3-2-1 buydown starts 3% below your permanent rate in year one, 2% below in year two, and 1% below in year three, before leveling off at your true rate in year four. A 2-1 buydown starts 2% below in year one and 1% below in year two. A 1-1 buydown starts 1% below in year one only.
This can be a great option if you expect your income to grow, want lower payments while you settle into a new home, or are using seller or builder concessions to help fund the buydown.
We’ll walk you through the numbers so you know exactly what your payment looks like in each step-up year, and what it settles into afterward.
Who pays for the buydown
The cost of the lower early payments is paid up front and held in an account that covers the difference each month. It’s most often paid by:
- The seller, as a concession in your purchase contract, which can be a strong negotiating tool in a slower market
- The builder, on new construction
- You, in some cases, or a lender credit
Asking the seller for a buydown can sometimes do more for your monthly payment than an equal price reduction.
How you qualify
For most loans, you qualify at the full permanent rate, not the lower starting rate. That protects you: you’ve already shown you can afford the payment it steps up to.
Common questions
Is my rate really fixed?
Yes. Your permanent rate is set at closing. The buydown only lowers what you pay in the first year or years.
What if I refinance or sell during the buydown?
Any unused buydown funds are typically applied to your loan balance. We’ll confirm how your lender handles it.
Which loans allow a buydown?
Buydowns are common on conventional, FHA and VA purchase loans. Availability depends on the lender.
Want to see your payment in each year? Call us at 303-931-3239, or get prequalified online.