Temporary Rate Buydowns

A temporary buydown lowers your mortgage payment for the first one to three years of the loan. The difference is paid up front, usually by the seller or the builder, into an account that covers the gap each month. After the buydown period your payment steps up to the full note rate, which never changes.

Justin Lazzaro, NMLS #1229453 | Reasy Financial, LLC, NMLS #2446155 | Licensed in Arizona, Pennsylvania, Florida, and Texas

Who a temporary buydown fits

A buydown is a negotiating tool. It is most useful when someone else is willing to fund it.

Buyers with a motivated seller or builder

A seller credit used for a buydown can lower your early payments more than the same money taken off the price.

Buyers who expect income to grow

Lower payments in the early years can ease the move from renting to owning.

Who it usually does not fit

It does not help you qualify, and it is not available on investment properties or cash-out refinances.

How a temporary buydown works

1

You qualify at the full rate

The lender approves you based on the full note rate payment, not the reduced one, so there is no surprise later.

2

The buydown is funded at closing

The seller, builder, or lender deposits the total subsidy into an account held by the loan servicer.

3

The payment steps up on schedule

Each year the reduction shrinks until you are paying the full note rate for the rest of the loan.

Common structures are called 3-2-1, 2-1, and 1-0 buydowns, and not every structure is available on every loan type. They are most common on fixed-rate purchase loans for a primary home or second home. Seller contributions are negotiated and never guaranteed.

How it compares to other options

There is more than one way to use a seller credit or your own cash to lower the cost of a loan.

How a temporary buydown compares to other ways to use a seller credit or your own cash
OptionWhat it changesWorth knowing
Temporary buydownLowers the payment for the first one to three yearsThe full payment returns on a set schedule
Permanent buydown with discount pointsLowers the rate for the life of the loanCosts more up front, and it takes time to recover the cost
Price reductionLowers the loan amountA small effect on the payment, and a lower purchase price
Closing cost creditLowers your cash to closeNo effect on the payment

Three things to know before you apply

1

The payment will go up

The increases are scheduled and disclosed at closing. Budget for the full payment from the start.

2

It is not a bet on refinancing

If rates fall you may be able to refinance, and unused buydown funds are typically credited to the loan. No one can promise that rates will fall.

3

Compare it with a price cut or points

The same seller money can be used in different ways. I will show you the numbers for each.

Guidelines change. I confirm current requirements with the lender before quoting anything. You can estimate a payment with the mortgage calculator.

Common questions about temporary buydowns

Short answers to common questions. Program rules vary by lender, so treat these as general guidance, not a loan decision.

Who pays for a temporary buydown?

Usually the seller or the builder, as a negotiated credit. Some lenders also allow lender-paid or borrower-paid buydowns.

Does a buydown help me qualify?

No. You qualify at the full note rate payment.

What happens to the money if I refinance or sell early?

Unused funds are typically applied to your loan balance at payoff. The details are in the buydown agreement.

Which loans allow temporary buydowns?

Many conventional, FHA, and VA purchase loans. FHA and VA limit them to fixed-rate loans, and they are generally not available on VA streamline refinances or construction loans.

Is a buydown better than a lower price?

It depends on how long you keep the loan and what matters more to you, the early payments or the loan balance. We compare both.

Where do you offer temporary buydowns?

I am licensed in Arizona, Pennsylvania, Florida, and Texas, and I compare options across multiple wholesale lenders.

Ready to talk it through?

Pick a time that works for you. We'll go over your goals and next steps, no pressure, just a conversation. Prefer to call or text instead? Reach me directly at (412) 638-4982, or book a quick Zoom if that's easier.