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Key Highlights
The Benefits
Lower Payments
Reduce initial housing costs.
Easier Transition
Gradually step into full payments.
Flexible Options
Choose from available structures.
What's Required
Eligible Loan
Program requirements apply.
Buydown Funds
Funds must be provided.
Mortgage Qualification
Standard qualification applies.
The Ins & Outs
How it Works
A Temporary Buydown reduces a homebuyer's effective monthly mortgage payment during the first few years of the loan. Funds contributed toward the buydown are used to temporarily offset a portion of the borrower's monthly payment before the payment returns to the amount based on the full note rate.
Common structures include 1-0, 2-1, and 3-2-1 buydowns, depending on the loan program and lender. Temporary Buydowns can be especially useful for buyers who expect their income to increase or simply want lower housing payments during the first years of homeownership.
Example Scenario
A homebuyer purchases a home using a 2-1 Temporary Buydown funded by the seller. Their effective mortgage payment is calculated at a rate 2% below the note rate during the first year and 1% below during the second year. Beginning in the third year, the borrower makes the full payment based on the original note rate.
What is a Temporary Buydown?
A Temporary Buydown uses funds contributed upfront to reduce a borrower's effective mortgage payment for a specified period at the beginning of the loan.
What is a 2-1 Buydown?
A 2-1 Buydown generally reduces the effective payment by an amount corresponding to a rate 2% below the note rate during the first year and 1% below during the second year. The borrower then makes the full payment based on the note rate beginning in year three.
Who can pay for the buydown?
Depending on the loan program, buydown funds may be contributed by an eligible third party, such as a home seller or builder. Contribution requirements vary by program.
Does a Temporary Buydown change my interest rate?
No. The mortgage's note rate remains the same. Buydown funds temporarily subsidize a portion of the required monthly payment during the specified buydown period.
What happens when the buydown ends?
Once the temporary period ends, the borrower is responsible for the full monthly payment based on the original terms of the mortgage.
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