{"id":5373,"date":"2026-10-16T08:56:03","date_gmt":"2026-10-16T13:56:03","guid":{"rendered":"https:\/\/riverbankfinance.com\/blog\/?p=5373"},"modified":"2026-10-16T12:32:59","modified_gmt":"2026-10-16T17:32:59","slug":"temporary-buydown","status":"publish","type":"post","link":"https:\/\/riverbankfinance.com\/blog\/temporary-buydown\/","title":{"rendered":"Temporary Buydown: What a 2-1 or 3-2-1 Buydown Really Costs (and Who Pays)"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">A seller offers to &#8220;buy down your rate.&#8221; It sounds like free money. Sometimes it is the best deal on the table. Sometimes the same dollars would do more for you as a price cut or discount points, and once in a while the offer can&#8217;t legally be done the way it&#8217;s written.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This guide shows how a <strong>temporary buydown<\/strong> works, what a 2-1 or 3-2-1 buydown actually costs, how much a seller is allowed to pay, and how to tell whether you should take it. Every example uses real math you can check with our <a href=\"https:\/\/riverbankfinance.com\/temporary-buydown-calculator.html\">temporary buydown calculator<\/a>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>The short answer:<\/strong> A temporary buydown lowers your mortgage rate for the first one to three years, then your payment steps up to the full fixed rate for the rest of the loan. Someone, usually the seller or builder, deposits the cost into an escrow account at closing. You still qualify at the full rate, and the buydown cost counts against seller concession limits.<\/p>\n\n\n\n<div class=\"wp-block-contact-form-7-contact-form-selector\">\n<div class=\"wpcf7 no-js\" id=\"wpcf7-f185-o1\" lang=\"en-US\" dir=\"ltr\" data-wpcf7-id=\"185\">\n<div class=\"screen-reader-response\"><p role=\"status\" aria-live=\"polite\" aria-atomic=\"true\"><\/p> <ul><\/ul><\/div>\n<form action=\"\/blog\/wp-json\/wp\/v2\/posts\/5373#wpcf7-f185-o1\" method=\"post\" class=\"wpcf7-form init\" aria-label=\"Contact form\" novalidate=\"novalidate\" data-status=\"init\">\n<fieldset class=\"hidden-fields-container\"><input type=\"hidden\" name=\"_wpcf7\" value=\"185\" \/><input type=\"hidden\" name=\"_wpcf7_version\" value=\"6.1.7\" \/><input type=\"hidden\" name=\"_wpcf7_locale\" value=\"en_US\" \/><input type=\"hidden\" name=\"_wpcf7_unit_tag\" value=\"wpcf7-f185-o1\" \/><input type=\"hidden\" name=\"_wpcf7_container_post\" value=\"0\" \/><input type=\"hidden\" name=\"_wpcf7_posted_data_hash\" value=\"\" \/><input type=\"hidden\" name=\"_wpcf7_recaptcha_response\" value=\"\" \/>\n<\/fieldset>\n<div class=\"application_form\">\n\t<div class=\"block_top\" id=\"apply_form\">\n\t<\/div>\n\t<div class=\"spacer_top\">\n\t<\/div>\n\t<div class=\"ApplyFullHeader\">\n\t\t<p class=\"replaceheader\">Request Home Loan Information Now!\n\t\t<\/p>\n\t<\/div>\n\t<div class=\"blueBox\">\n\t\t<p><span class=\"wpcf7-form-control-wrap\" data-name=\"your-name\"><input size=\"40\" maxlength=\"400\" class=\"wpcf7-form-control wpcf7-text wpcf7-validates-as-required\" aria-required=\"true\" aria-invalid=\"false\" placeholder=\"Your Name (required)\" value=\"\" type=\"text\" name=\"your-name\" \/><\/span>\n\t\t<\/p>\n\t\t<p><span class=\"wpcf7-form-control-wrap\" data-name=\"your-email\"><input size=\"40\" maxlength=\"400\" class=\"wpcf7-form-control wpcf7-email wpcf7-validates-as-required wpcf7-text wpcf7-validates-as-email\" aria-required=\"true\" aria-invalid=\"false\" placeholder=\"Your Email (required)\" value=\"\" type=\"email\" name=\"your-email\" \/><\/span>\n\t\t<\/p>\n\t\t<p><span class=\"wpcf7-form-control-wrap\" data-name=\"your-phone\"><input size=\"40\" maxlength=\"400\" class=\"wpcf7-form-control wpcf7-text wpcf7-validates-as-required\" aria-required=\"true\" aria-invalid=\"false\" placeholder=\"Phone:\" value=\"\" type=\"text\" name=\"your-phone\" \/><\/span>\n\t\t<\/p>\n\t\t<p><span class=\"wpcf7-form-control-wrap\" data-name=\"your-goal\"><select class=\"wpcf7-form-control wpcf7-select\" aria-invalid=\"false\" name=\"your-goal\"><option value=\"Purchase\">Purchase<\/option><option value=\"Refinance\">Refinance<\/option><option value=\"Cash Out\">Cash Out<\/option><option value=\"More Information\">More Information<\/option><\/select><\/span>\n\t\t<\/p>\n\t\t<p><span class=\"wpcf7-form-control-wrap\" data-name=\"your-message\"><textarea cols=\"40\" rows=\"10\" maxlength=\"2000\" class=\"wpcf7-form-control wpcf7-textarea\" aria-invalid=\"false\" placeholder=\"Your Message:\" name=\"your-message\"><\/textarea><\/span>\n\t\t<\/p>\n\t\t<p><span class=\"wpcf7-form-control-wrap\" data-name=\"referer-page\"><input size=\"40\" maxlength=\"400\" class=\"wpcf7-form-control wpcf7-text referer-page\" aria-invalid=\"false\" value=\"\" type=\"text\" name=\"referer-page\" \/><\/span><br \/>\n\t\t\n\t\t<\/p>\n\t\t<p><input class=\"wpcf7-form-control wpcf7-submit has-spinner submit\" type=\"submit\" value=\"Submit Now!\" \/>\n\t\t<\/p>\n\t<\/div>\n\t<div style=\"text-align: justify; color:#666666;font-size: small;\">\n\t\t<p>By clicking \"Submit Now!\", you consent to receive calls and texts at the number you provided, including marketing by autodialer and prerecorded and artificial voice, and email, from Riverbank Finance LLC about your inquiry and other home-related matters, but not as a condition of any purchase; this applies regardless of whether you check, or leave un-checked, any box above. You also agree to our Privacy Policy and Terms of Use regarding the information relating to you. Msg\/data rates may apply. This consent applies even if you are on a corporate, state or national Do Not Call list. This no obligation inquiry does not constitute a mortgage application. To apply now or get immediate assistance, call us at 1-800-555-2098.\n\t\t<\/p>\n\t<\/div>\n<\/div><p style=\"display: none !important;\" class=\"akismet-fields-container\" data-prefix=\"_wpcf7_ak_\"><label>&#916;<textarea name=\"_wpcf7_ak_hp_textarea\" cols=\"45\" rows=\"8\" maxlength=\"100\"><\/textarea><\/label><input type=\"hidden\" id=\"ak_js_1\" name=\"_wpcf7_ak_js\" value=\"1\"\/><script>\ndocument.getElementById( \"ak_js_1\" ).setAttribute( \"value\", ( new Date() ).getTime() );\n<\/script>\n<\/p><div class=\"wpcf7-response-output\" aria-hidden=\"true\"><\/div>\n<\/form>\n<\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\">How does a temporary buydown work?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">A temporary buydown is a deposit that pays part of your mortgage payment for the first one to three years. Your actual interest rate, the note rate printed on your loan documents, never changes. The deposit simply covers the gap between the full payment and a lower &#8220;bought-down&#8221; payment.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Think of it as a prepaid gift card for your mortgage. At closing, the seller loads the card. Each month your servicer swipes off the difference, and you pay the rest. When the card hits zero, you pay the full amount.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Here&#8217;s a real example. On a $261,250 loan at a 6.5% note rate, the full principal and interest payment is about $1,651 a month. With a 2-1 buydown, you pay about $1,324 in year one and $1,483 in year two. The escrow account covers the rest. In year three you pay $1,651 and keep paying it for the life of the loan.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">What this means for you: a temporary buydown is not an adjustable-rate mortgage. Your rate is fixed from day one. Only your share of the payment changes, and on a schedule you know in advance. <a href=\"https:\/\/selling-guide.fanniemae.com\/sel\/b2-1.4-04\/temporary-interest-rate-buydowns\">Fannie Mae&#8217;s rules<\/a> require the note to show the full permanent payment, cap the reduction at 3 percentage points, and limit each yearly increase to 1 point.<\/p>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-fe48e5de wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link has-vivid-cyan-blue-background-color has-background wp-element-button\" href=\"#apply_form\">Get Buydown Quote<\/a><\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\">2-1 vs. 3-2-1 vs. 1-0 buydown: what you pay each year<\/h2>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-large\"><a href=\"https:\/\/riverbankfinance.com\/blog\/wp-content\/uploads\/2026\/10\/temporary-buydown.webp\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"683\" src=\"https:\/\/riverbankfinance.com\/blog\/wp-content\/uploads\/2026\/10\/temporary-buydown-1024x683.webp\" alt=\"Bar chart of a 2-1 temporary buydown showing the monthly mortgage payment rising in year one, year two and year three\" class=\"wp-image-5374\" srcset=\"https:\/\/riverbankfinance.com\/blog\/wp-content\/uploads\/2026\/10\/temporary-buydown-1024x683.webp 1024w, https:\/\/riverbankfinance.com\/blog\/wp-content\/uploads\/2026\/10\/temporary-buydown-300x200.webp 300w, https:\/\/riverbankfinance.com\/blog\/wp-content\/uploads\/2026\/10\/temporary-buydown-768x512.webp 768w, https:\/\/riverbankfinance.com\/blog\/wp-content\/uploads\/2026\/10\/temporary-buydown.webp 1536w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/a><\/figure>\n<\/div>\n\n\n<p class=\"wp-block-paragraph\">The numbers in a buydown&#8217;s name are how many percentage points come off the rate each year. A 2-1 buydown means 2 points off in year one and 1 point off in year two. A 3-2-1 buydown runs three years. A 1-0 buydown takes 1 point off for year one only.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Here&#8217;s how each structure plays out on the same $261,250 loan at a hypothetical 6.5% note rate, 30-year fixed.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><th>Buydown type<\/th><th>Year 1 payment<\/th><th>Year 2 payment<\/th><th>Year 3 payment<\/th><th>Year 4+ payment<\/th><th>Total cost<\/th><\/tr><\/thead><tbody><tr><td>None<\/td><td>$1,651<\/td><td>$1,651<\/td><td>$1,651<\/td><td>$1,651<\/td><td>$0<\/td><\/tr><tr><td>1-0 buydown<\/td><td>$1,483 (5.5%)<\/td><td>$1,651<\/td><td>$1,651<\/td><td>$1,651<\/td><td>$2,015<\/td><\/tr><tr><td>2-1 buydown<\/td><td>$1,324 (4.5%)<\/td><td>$1,483 (5.5%)<\/td><td>$1,651<\/td><td>$1,651<\/td><td>$5,946<\/td><\/tr><tr><td>3-2-1 buydown<\/td><td>$1,173 (3.5%)<\/td><td>$1,324 (4.5%)<\/td><td>$1,483 (5.5%)<\/td><td>$1,651<\/td><td>$11,684<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">Principal and interest only. Taxes, insurance and mortgage insurance come on top. Rates are hypothetical and used only to show the math; see today&#8217;s <a href=\"https:\/\/riverbankfinance.com\/michigan-mortgage-rates.html\">Michigan mortgage rates<\/a> for current pricing.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Notice how fast the cost climbs. Going from a 2-1 to a 3-2-1 buys you one more year of help but nearly doubles the price. That matters a lot once you hit the seller concession caps below.<\/p>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-fe48e5de wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link has-vivid-cyan-blue-background-color has-background wp-element-button\" href=\"#apply_form\">Request Buydown<\/a><\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\">What does a temporary buydown cost?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">A temporary buydown costs exactly the total of the payment discounts it gives you. No more, no less. Lenders add up the monthly difference for every discounted month, and that sum is the escrow deposit.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For the 2-1 example: $328 a month saved for 12 months is $3,931. Then $168 a month for 12 months is $2,015. Add them and the seller deposits $5,946 at closing, about 2.3% of the loan amount. A 3-2-1 on the same loan costs $11,684, about 4.5% of the loan.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">That math has a quiet consequence. If you pay for your own temporary buydown, you&#8217;re prepaying your own interest dollar for dollar. You save nothing overall. A temporary buydown only puts money in your pocket when someone else funds it.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Want your own numbers? Plug your loan amount, rate and buydown type into the <a href=\"https:\/\/riverbankfinance.com\/temporary-buydown-calculator.html\">temporary buydown calculator<\/a>. It shows your payment each year and what the seller needs to deposit.<\/p>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-fe48e5de wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link has-vivid-cyan-blue-background-color has-background wp-element-button\" href=\"#apply_form\">Request Cost Breakdown<\/a><\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\">Who pays for a seller paid buydown, and how much can they contribute?<\/h2>\n\n\n\n<figure class=\"wp-block-image size-large\"><a href=\"https:\/\/riverbankfinance.com\/blog\/wp-content\/uploads\/2026\/10\/seller-paid-closing-costs.webp\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"683\" src=\"https:\/\/riverbankfinance.com\/blog\/wp-content\/uploads\/2026\/10\/seller-paid-closing-costs-1024x683.webp\" alt=\"Seller and buyer signing a purchase agreement with a seller paid buydown credit for a Grand Rapids home\" class=\"wp-image-5376\" srcset=\"https:\/\/riverbankfinance.com\/blog\/wp-content\/uploads\/2026\/10\/seller-paid-closing-costs-1024x683.webp 1024w, https:\/\/riverbankfinance.com\/blog\/wp-content\/uploads\/2026\/10\/seller-paid-closing-costs-300x200.webp 300w, https:\/\/riverbankfinance.com\/blog\/wp-content\/uploads\/2026\/10\/seller-paid-closing-costs-768x512.webp 768w, https:\/\/riverbankfinance.com\/blog\/wp-content\/uploads\/2026\/10\/seller-paid-closing-costs.webp 1536w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/a><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">Most temporary buydowns are seller paid or builder paid. A lender can also fund one, usually as a promotion. Whoever pays, the money goes into a custodial escrow account, and the terms go into a written buydown agreement.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Here&#8217;s the part most buyers never hear. When a seller, builder or real estate agent pays for a buydown, the cost counts as an &#8220;interested party contribution,&#8221; or IPC. Every loan program caps IPCs as a percentage of the price, and the buydown shares that cap with any closing cost credit.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><th>Loan type<\/th><th>Seller contribution cap<\/th><th>Max on a $275,000 home<\/th><th>Source<\/th><\/tr><\/thead><tbody><tr><td>Conventional, less than 10% down<\/td><td>3%<\/td><td>$8,250<\/td><td><a href=\"https:\/\/selling-guide.fanniemae.com\/sel\/b3-4.1-02\/interested-party-contributions-ipcs\">Fannie Mae B3-4.1-02<\/a><\/td><\/tr><tr><td>Conventional, 10% to 24.99% down<\/td><td>6%<\/td><td>$16,500<\/td><td><a href=\"https:\/\/selling-guide.fanniemae.com\/sel\/b3-4.1-02\/interested-party-contributions-ipcs\">Fannie Mae B3-4.1-02<\/a><\/td><\/tr><tr><td>Conventional, 25%+ down<\/td><td>9%<\/td><td>$24,750<\/td><td><a href=\"https:\/\/selling-guide.fanniemae.com\/sel\/b3-4.1-02\/interested-party-contributions-ipcs\">Fannie Mae B3-4.1-02<\/a><\/td><\/tr><tr><td>FHA<\/td><td>6%<\/td><td>$16,500<\/td><td><a href=\"https:\/\/www.hud.gov\/program_offices\/housing\/sfh\/handbook_4000-1\">HUD Handbook 4000.1<\/a><\/td><\/tr><tr><td>VA<\/td><td>4% in concessions, plus normal closing costs<\/td><td>$11,000<\/td><td><a href=\"https:\/\/www.va.gov\/housing-assistance\/home-loans\/\">VA home loans<\/a><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">Now run the numbers. A buyer putting 5% down on a $275,000 conventional loan has a $8,250 cap. A 3-2-1 buydown costs $11,684. It doesn&#8217;t fit. Even a 2-1 at $5,946 leaves only $2,304 for closing costs. (Yes, this is why some &#8220;free 3-2-1&#8221; offers quietly shrink at the closing table.)<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The fix is usually simple: put 10% down to move into the 6% tier, switch to a 2-1, or split the seller&#8217;s money between a 2-1 and closing costs. Run it before you write the offer, not after.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A pattern we see often in West Michigan new construction: a builder advertises a 3-2-1 buydown, and a buyer with 5% down plans around that year-one payment. The cap math kills it during underwriting. Rebuilt as a 2-1 plus a closing cost credit, the deal closes, and the buyer still gets two years of lower payments.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Is a 2-1 buydown better than a price cut or discount points?<\/h2>\n\n\n\n<figure class=\"wp-block-image size-large\"><a href=\"https:\/\/riverbankfinance.com\/blog\/wp-content\/uploads\/2026\/10\/buydown-vs-price-reduction-vs-points.webp\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"683\" src=\"https:\/\/riverbankfinance.com\/blog\/wp-content\/uploads\/2026\/10\/buydown-vs-price-reduction-vs-points-1024x683.webp\" alt=\"Side-by-side comparison of a 2-1 buydown, a price reduction and discount points using the same seller credit\" class=\"wp-image-5377\" srcset=\"https:\/\/riverbankfinance.com\/blog\/wp-content\/uploads\/2026\/10\/buydown-vs-price-reduction-vs-points-1024x683.webp 1024w, https:\/\/riverbankfinance.com\/blog\/wp-content\/uploads\/2026\/10\/buydown-vs-price-reduction-vs-points-300x200.webp 300w, https:\/\/riverbankfinance.com\/blog\/wp-content\/uploads\/2026\/10\/buydown-vs-price-reduction-vs-points-768x512.webp 768w, https:\/\/riverbankfinance.com\/blog\/wp-content\/uploads\/2026\/10\/buydown-vs-price-reduction-vs-points.webp 1536w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/a><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">A 2-1 buydown beats an equal price cut unless you keep the loan about 14 years, and it beats discount points only if you sell or refinance within about five years. That&#8217;s the honest answer, and it&#8217;s the one most buydown pages skip.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Here&#8217;s the same $5,946 of seller money used three ways on our $261,250 loan at a hypothetical 6.5%.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><th>How the $5,946 is used<\/th><th>Monthly savings<\/th><th>Savings after 3 years<\/th><th>Savings after 7 years<\/th><th>Best for<\/th><\/tr><\/thead><tbody><tr><td>2-1 temporary buydown<\/td><td>$328 (yr 1), $168 (yr 2), $0 after<\/td><td>$5,946<\/td><td>$5,946<\/td><td>Tight early budget; plans to refinance or move<\/td><\/tr><tr><td>Price reduction<\/td><td>About $36<\/td><td>About $1,285<\/td><td>About $3,000<\/td><td>Keeping the loan 14+ years; also trims the down payment slightly<\/td><\/tr><tr><td>Discount points (about 2.3 points)<\/td><td>About $97, for life<\/td><td>About $3,475<\/td><td>About $8,108<\/td><td>Staying 6+ years with no refinance planned<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">The points row assumes each point (1% of the loan) lowers the rate about 0.25%. That&#8217;s a common rough rule, but point pricing changes daily, so get it in writing on your Loan Estimate.<\/p>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-fe48e5de wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link has-vivid-cyan-blue-background-color has-background wp-element-button\" href=\"#apply_form\">Ask About Buydown<\/a><\/div>\n<\/div>\n\n\n\n<p class=\"wp-block-paragraph\">Points pull ahead of the 2-1 after about 62 months. Before that, the buydown wins. And here&#8217;s the twist: if rates fall and you refinance, discount points are gone the day you refinance, but unused buydown money can be credited toward your payoff. That makes a temporary buydown a smart hedge when you think rates may drop.<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\">A recent client of ours was buying a home for a three-year work assignment, and their goal was the lowest possible payment while they lived there. Because they planned to sell around year three, a seller-paid 2-1 buydown was a near-perfect fit. They get the two lowest-payment years up front, and discount points would never have reached their break-even point in that time.<\/p>\n<\/blockquote>\n\n\n\n<p class=\"wp-block-paragraph\">The case where points win: a buyer who plans to stay ten-plus years, already has a payment that fits, and doesn&#8217;t want to bet on refinancing. For that person, permanent savings beat two good years.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What happens when a temporary buydown ends?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">When a temporary buydown ends, your payment rises to the full note-rate payment and stays there. On a 2-1, that&#8217;s two increases: about $159 a month at the start of year two and $168 at the start of year three in our example.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Lenders plan for this. Fannie Mae requires them to qualify you at the full note rate, not the bought-down rate, and FHA and VA lenders do the same. So a buydown won&#8217;t raise the price you&#8217;re approved for. It only softens the first years.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>The Michigan twist most buyers miss.<\/strong> In Michigan, a home&#8217;s taxable value &#8220;uncaps&#8221; the year after it sells and resets toward its State Equalized Value. For a home the seller owned a long time, your property tax bill can jump noticeably in your first full tax year. That increase usually shows up in your escrow after the first annual escrow review, right around month 12 to 14. Which is exactly when a 2-1 buydown takes its first step up.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Say your taxes rise $1,200 a year. That&#8217;s $100 more a month in escrow, on top of the $159 buydown step-up. Your payment jumps about $259 in one go, possibly more if there&#8217;s an escrow shortage to make up. Estimate the post-sale tax bill with our <a href=\"https:\/\/riverbankfinance.com\/michigan-property-tax-calculator.html\">Michigan property tax calculator<\/a> before you budget around year one.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>If you refinance or sell early:<\/strong> unused buydown funds are applied to your payoff, or returned to you or the lender, depending on the buydown agreement. Refinance at month 18 of a 2-1, and about six months of year-two help, roughly $1,008 in our example, should be credited. Read the agreement before closing. A lender-funded buydown can be written so leftover money goes back to the lender.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Temporary buydown rules: conventional, FHA and VA<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Temporary buydowns are allowed on conventional, FHA and VA purchase loans, but each program has its own limits. The big three rules: fixed-rate loans only in most cases, primary residence or second home, and qualification at the full note rate.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong><a href=\"https:\/\/riverbankfinance.com\/mortgage-programs\/conventional-mortgage.html\">Conventional loans<\/a>:<\/strong> Up to a 3-point reduction and three years. Principal residences and second homes only. Investment properties and cash-out refinances are not eligible under Fannie Mae&#8217;s guide. Use the <a href=\"https:\/\/riverbankfinance.com\/conventional-mortgage-payment-calculator.html\">conventional mortgage calculator<\/a> to see your full payment with PMI.<\/li>\n\n\n\n<li><strong><a href=\"https:\/\/riverbankfinance.com\/mortgage-programs\/fha-mortgage.html\">FHA loans<\/a>:<\/strong> Most lenders limit FHA buydowns to a 2-1 or 1-0, and the buydown counts toward FHA&#8217;s 6% seller contribution limit. Check the full payment with MIP on the <a href=\"https:\/\/riverbankfinance.com\/fha-mortgage-payment-calculator.html\">FHA mortgage calculator<\/a>.<\/li>\n\n\n\n<li><strong><a href=\"https:\/\/riverbankfinance.com\/mortgage-programs\/va-loan.html\">VA loans<\/a>:<\/strong> A seller-funded buydown counts as a concession under VA&#8217;s 4% cap, alongside things like a seller-paid funding fee. Normal closing costs the seller pays don&#8217;t count toward the 4%. Run the numbers on the <a href=\"https:\/\/riverbankfinance.com\/va-home-loan-mortgage-calculator.html\">VA loan calculator<\/a>.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Because Riverbank Finance works with 20+ wholesale lenders, buydown availability isn&#8217;t one company&#8217;s policy. Some lenders offer a 1-1 buydown, some don&#8217;t allow a 3-2-1 on FHA at all, and pricing for the same structure can differ. That&#8217;s worth comparing before you commit to a structure in your purchase agreement.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Who a temporary buydown is (and isn&#8217;t) right for<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">A temporary buydown fits a short list of buyers well. It fits another list badly. Be honest about which one you&#8217;re on.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Good fit:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>A household where one income is about to rise or return, such as a spouse coming back from parental leave in six months. The buydown bridges the gap.<\/li>\n\n\n\n<li>A buyer moving in with real first-year costs: furniture, a fence, the furnace the inspection flagged. Lower payments free up cash when it&#8217;s tight.<\/li>\n\n\n\n<li>A buyer who expects to refinance if rates drop. Unused buydown money isn&#8217;t wasted.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Not a fit:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Anyone whose budget only works at the year-one payment. You qualify at the full rate for a reason. If $1,651 plus taxes and insurance doesn&#8217;t fit, the buydown just delays the problem.<\/li>\n\n\n\n<li>Buyers planning to stay ten-plus years with no refinance in sight. Discount points usually win.<\/li>\n\n\n\n<li>Low-down-payment buyers who need every dollar of seller help for closing costs. A buydown competes with that money under the same cap.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">The mistake that comes up most: a buyer assumes the buydown helps them qualify for a bigger house. It doesn&#8217;t. They pick a price based on the year-one payment, and underwriting approves them on the full payment instead. Start from the full payment and treat the buydown as a bonus.<\/p>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-fe48e5de wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link has-vivid-cyan-blue-background-color has-background wp-element-button\" href=\"#apply_form\">Request Quote<\/a><\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\">Frequently asked questions about temporary buydowns<\/h2>\n\n\n\n<h3 class=\"wp-block-heading\">What does 2-1 buydown mean?<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">A 2-1 buydown means your rate is 2 percentage points below your note rate in year one and 1 point below in year two. From year three on, you pay the full note rate for the rest of the loan. On a 6.5% loan, payments are figured at 4.5%, then 5.5%, then 6.5%. Someone, usually the seller, deposits the difference into an escrow account at closing.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Can a buyer pay for their own temporary buydown?<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Many lenders allow it if the money comes from your own documented funds. But paying for your own temporary buydown just prepays your own interest, so you save nothing overall. If you have extra cash to spend, discount points or a larger down payment usually do more for you. Temporary buydowns make the most sense when the seller, builder or lender is paying.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Do you qualify for a mortgage at the bought-down rate?<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">No. Fannie Mae requires lenders to qualify you at the full note rate, and FHA and VA lenders do the same. A temporary buydown lowers your early payments, but it won&#8217;t raise the price you&#8217;re approved for. If the full payment doesn&#8217;t fit your budget, the buydown doesn&#8217;t fix that.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">What happens to buydown money if I refinance or sell early?<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Under Fannie Mae&#8217;s rules, unused buydown funds are credited toward your loan payoff, or returned to you or the lender, depending on your buydown agreement. Refinance halfway through year two of a 2-1 and the leftover months aren&#8217;t lost. Read the agreement before closing, because a lender-funded buydown can be written so the leftover goes back to the lender.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Can you get a temporary buydown on an investment property or cash-out refinance?<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Not on a Fannie Mae conventional loan. Its guide allows temporary buydowns on principal residences and second homes and lists investment properties and cash-out refinances as ineligible. Most buydowns happen on purchases anyway, because the seller or builder is the one paying for them.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Get the buydown math right before you sign<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">A temporary buydown is a good deal when someone else pays, the full payment already fits your budget, and the cost fits under your loan&#8217;s seller concession cap. Miss any of those three and a price cut, points or a closing cost credit may serve you better.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Run your numbers in the <a href=\"https:\/\/riverbankfinance.com\/temporary-buydown-calculator.html\">temporary buydown calculator<\/a>, then compare structures with a licensed Riverbank Finance loan officer before you write the offer. <a href=\"https:\/\/riverbankfinance.com\/apply-now.html\">Get a real quote<\/a> or call 800-555-2098.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">More tools: the full <a href=\"https:\/\/riverbankfinance.com\/mortgage-calculator-learning-center.html\">Mortgage Calculator Learning Center<\/a> and the <a href=\"https:\/\/riverbankfinance.com\/mortgage-amortization-schedule.html\">mortgage amortization schedule<\/a>.<\/p>\n\n\n\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@graph\": [\n    {\n      \"@type\": \"Article\",\n      \"headline\": \"Temporary Buydown: What a 2-1 or 3-2-1 Buydown Really Costs (and Who Pays)\",\n      \"description\": \"A temporary buydown lowers your mortgage payment for 1 to 3 years. See what a 2-1 or 3-2-1 buydown costs, who pays, and when a price cut or points beat it.\",\n      \"mainEntityOfPage\": \"https:\/\/riverbankfinance.com\/blog\/temporary-buydown\/\",\n      \"datePublished\": \"[YYYY-MM-DD]\",\n      \"dateModified\": \"[YYYY-MM-DD]\",\n      \"author\": {\n        \"@type\": \"Person\",\n        \"name\": \"[AUTHOR NAME]\",\n        \"jobTitle\": \"[TITLE]\",\n        \"url\": \"[AUTHOR BIO URL]\"\n      },\n      \"publisher\": {\n        \"@type\": \"Organization\",\n        \"name\": \"Riverbank Finance LLC\",\n        \"url\": \"https:\/\/riverbankfinance.com\/\",\n        \"logo\": {\n          \"@type\": \"ImageObject\",\n          \"url\": \"https:\/\/riverbankfinance.com\/img\/riverbank-finance-logo.png\"\n        }\n      }\n    },\n    {\n      \"@type\": \"FAQPage\",\n      \"mainEntity\": [\n        {\n          \"@type\": \"Question\",\n          \"name\": \"What does 2-1 buydown mean?\",\n          \"acceptedAnswer\": { \"@type\": \"Answer\", \"text\": \"A 2-1 buydown means your rate is 2 percentage points below your note rate in year one and 1 point below in year two. 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