What they are?
What is it?
A temporary buydown lowers the buyer’s interest rate for the first one or two years of the loan.
How does it work?
- Example 2-1 Buydown: Year 1 rate is 2% lower, Year 2 is 1% lower, Year 3+ returns to full note rate.
- Types of Buydowns usually offered: 1-0, 2-1, 3-2-1, 1-1
- The cost is paid upfront: Seller concessions deposited into a buydown escrow, lender paid via pricing adjustments on the rate.
- Lenders may allow borrower paid, but it’s not the norm unless is a refinance
Where is it available?
Loan types available
Conventional, FHA, VA (restrictions apply), USDA (program dependent).
Where available in Illinois
Available statewide; commonly used in seller negotiations and new construction.
Key Qualifications
Qualification requirements
- Borrower must qualify at the full note rate
- Contribution limits apply
- Availability varies by lender
