A Temporary Rate Buydown is a powerful option for both homebuyers and sellers
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Kimberly Jones
Sr. Loan Officer, NMLS#814140
Fairway Independent Mortgage Corp.

What is a temporary buydown?

A temporary buydown allows the seller and/or borrower to prepay some of the interest on a fixed-rate mortgage in exchange for a discounted interest rate for the first one to two years of your mortgage, after which the interest rate reverts to the full note rate for the remainder of the loan. To cover the difference between the reduced payments made by you (the borrower) and the regular payments received by the lender, a predetermined amount is withdrawn from a special escrow account funded by the seller that is set up for that purpose. The total monthly payment received by the lender, consisting of the payment made by you (the borrower) plus the withdrawal from the established escrow account is the same as it would be in the absence of the temporary buydown.

The table below lists the temporary buydown options by loan type.

*A 3/2/1 temporary buydown is only available as a seller-paid buydown. **Lender-paid buydown is only available using premium pricing and may not be available for every scenario. ***Not available through all Jumbo investors.

How does a 3/2/1 temporary buydown work?

A 3/2/1 temporary buydown is a temporary reduction below note rate of three percent (3%) during the first year, a reduction below note rate of two percent (2%) during the second year of the loan, and a reduction below note rate of one percent (1%) during the third year, after which the interest rate reverts to the full note rate for the remainder of the loan. The interest rate change each year is automatic, and the borrower is not required to requalify for the loan.

Below is an example of the breakdown of a 3/2/1 temp buydown on a $100,000 loan - 30 yr fixed rate mortgage with a 6.5% interest rate, 6.717% APR.

We also have a 2/1 and 1/0 temporary buydown available. Contact us for more information!

1202 Lakeway Drive Suite 12. Lakeway, TX. 78734. Copyright©2023 Fairway Independent Mortgage Corporation. NMLS#2289. 4750 S. Biltmore Lane, Madison, WI 53718, 1-866-912-4800. All rights reserved. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply. Equal Housing Lender. Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act, License No 41DBO-78367.  Licensed by the Department of Business Oversight under the California Financing Law, NMLS #2289.  Loans made or arranged pursuant to a California Residential Mortgage Lending Act License.