A seller-paid rate buydown can cut your mortgage payment by hundreds of dollars a month for the first one to three years — often more than a price cut of the same size ever could. Our buyer agents negotiate it into your offer.
A temporary rate buydown lowers your mortgage payment for the first one to three years of the loan. The seller deposits a lump sum at closing into an escrow account, and each month the lender draws from it to cover the gap between your reduced payment and the full payment. Your actual note rate never changes, so after the buydown period ends you pay the regular fixed payment for the rest of the loan.
The most common version is the 2-1 buydown: 2 points off your rate in year one, 1 point off in year two, full rate from year three on. In New Jersey, the buydown is written into your offer as a seller concession and can also be negotiated during the three-business-day attorney review period.
Your lender still collects the full note-rate payment every month. You pay the reduced amount; the seller's prepaid escrow covers the rest. When the escrow runs out, the buydown is over.
That makes a buydown a payment tool, not a qualifying tool: lenders approve you at the full note rate. Its job is to give you breathing room in the most expensive years of homeownership — moving costs, furniture, repairs — and to buy time in case rates fall and a refinance makes sense.
See your own numbersCosts below use the same $495,000 loan at 7.03%. Your agent and lender will match the structure to how long you plan to stay and how much the seller will give.
2 points lower in year one, 1 point lower in year two. Big early relief at a price most sellers will accept.
3 points off in year one, then 2, then 1. Best for long-sitting listings where the seller is highly motivated.
1 point off for year one only. Small enough to leave room under a 3% concession cap for some closing-cost credit.
Seller pays discount points to lower your rate for the life of the loan. Pricing varies daily by lender, so we quote it with your loan officer.
Enter a home price and rate to see your payment each year, what the buydown costs the seller, whether it fits your loan program's concession limit, and how it stacks up against a price cut.
| Period | Rate | Your P&I | Monthly savings |
|---|
Estimates only: principal and interest on a 30-year fixed loan; excludes taxes, insurance, HOA and mortgage insurance. Buydown cost is the sum of the monthly payment differences over the buydown period. Concession limits shown are general program guidelines (conventional per Fannie Mae/Freddie Mac by down payment, primary residence, on the lower of price or appraised value; FHA 6%; VA 4% of reasonable value in concessions, separate from normal closing costs) and other seller credits count toward the same cap. Actual terms, availability and eligibility are set by your lender. Hallmark Realtors is a real estate brokerage, not a lender; this is not a loan offer or commitment.
Same seller dollars, very different results. On a $550,000 home with 10% down at 7.03%, here is what about $11,500 buys you:
in year one, then −$326/mo in year two.
for the life of the loan.
That is why a buydown request often gets a “yes” from sellers who have refused to reduce their price — especially on homes that have been on the market for a few weeks.
Our agents track days on market, price history and seller motivation across Union, Middlesex, Monmouth, Essex and Somerset counties to find listings where a buydown request lands.
Send Me Buydown-Friendly ListingsSeller-funded buydowns count as seller concessions, so they share one cap with any closing-cost credit. The cap depends on your loan type and down payment. Conventional limits are figured on the lower of the price or appraised value, and temporary buydowns are not allowed on investment properties.
| Loan type | Down payment | Max seller concessions |
|---|---|---|
| Conventional (primary home) | Less than 10% | 3% of price |
| Conventional (primary home) | 10% to under 25% | 6% of price |
| Conventional (primary home) | 25% or more | 9% of price |
| FHA | Any | 6% of price |
| VA | Any | 4% of VA reasonable value, plus normal closing costs |
One rule every buyer should know: plan to qualify at the full note rate, not the bought-down rate. Fannie Mae and FHA require it. VA guidelines allow an exception when there are strong signs your income will rise, but your lender decides. Get pre-approved at today's rate first, then use the buydown to lower what you actually pay.
We connect you with a lender who offers temporary buydowns and pre-approves you at the full note rate.
We flag listings with long days on market, price cuts or motivated sellers — where concessions are most likely.
Your offer requests a seller credit sized to fund the buydown and fit your loan program's cap.
NJ's three-business-day attorney review gives both sides a window to finalize concession language.
The seller's funds go into buydown escrow at closing, and your lower payment starts with your first bill.
Lower payments in year one and two leave room for furniture, repairs and building savings after closing.
Raises, a second income coming online, or a finished degree: the payment steps up as your earnings do.
If rates fall, you may refinance. A buydown gives you relief in the meantime instead of waiting on the sidelines.
A 2-1 buydown is a temporary mortgage rate reduction. Your payment is calculated at 2 percentage points below your note rate in year one and 1 point below in year two, then returns to the full note rate for years three through thirty. The difference is prepaid at closing into an escrow account, usually funded by the seller as a concession.
Yes. A seller can fund a temporary or permanent buydown as a seller concession written into the contract. In New Jersey, the buydown credit is typically negotiated in the offer or during the three-business-day attorney review period. The amount must fit within your loan program's concession limit.
The cost equals the total payment savings over the two-year buydown period. On a $495,000 30-year loan at 7.03%, a 2-1 buydown costs about $11,550 and lowers the principal-and-interest payment by about $637 per month in year one and $326 per month in year two. Use the calculator above for your numbers.
Buydown funds count toward seller concession limits. Conventional loans allow 3% of the price with under 10% down, 6% with 10% to under 25% down, and 9% with 25% or more down. FHA allows 6%. VA allows 4% of the home's reasonable value in concessions, separate from normal closing costs.
No. For conventional loans, Fannie Mae requires lenders to qualify you at the full note rate, not the reduced rate. FHA requires the same. VA guidelines allow qualifying at the first-year payment only when there are strong indications your income will rise. A buydown lowers what you pay early on; it does not increase how much you can borrow.
Often, yes. On a $550,000 purchase with 10% down, spending about $11,500 on a 2-1 buydown saves the buyer roughly $637 per month in year one, while the same $11,500 as a price cut lowers the payment by only about $70 per month. Sellers also like buydowns because the recorded sale price stays higher.
Buydown funds sit in an escrow account. If you refinance or sell during the buydown period, under Fannie Mae rules unused funds are credited toward the payoff or returned to the borrower or lender, as the buydown agreement specifies. Confirm the terms with your lender before closing.
Yes. Temporary buydowns are available on conventional, FHA, and VA loans when the lender offers them. Seller-funded buydowns count toward each program's concession limit: 6% for FHA and 4% of reasonable value for VA.
Tell us what you're looking for. A Hallmark buyer agent will follow up to:
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alex@hallmarkrealtors.com
112 Westfield Ave, Clark, NJ 07066