Frequently asked
What is a 2-1 buydown?
Quick answer
A 2-1 buydown is a temporary rate reduction of 2 percentage points in the first year and 1 point in the second year, after which the rate returns to the full note rate. The cost is paid up front, often by the seller or builder, and held in escrow.
Related questions
What is a seller concession?
A seller concession is an agreement in the contract for the seller to pay part of the buyer's closing costs. It reduces the cash the buyer needs at closing but does not give the buyer money, and it is capped by the loan type.
How much can a seller pay toward closing costs?
It depends on the loan. Conventional loans generally allow 3%, 6%, or 9% depending on the down payment, FHA allows up to 6%, and VA allows up to 4% for concessions beyond normal closing costs. Your lender confirms the exact current limits.
Is a rate buydown worth it?
It depends on how long you keep the loan and what else the money could do. A permanent buydown with discount points pays off only after a break-even period, often several years. A temporary buydown lowers early payments but does not change the long-term rate.
Should I ask for a price reduction or a seller credit?
A price reduction is permanent and lowers your loan balance, while a credit helps with cash at closing or funds a buydown. Which is better depends on whether your constraint is monthly payment or cash on hand, and a lender can compare both.
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