A 2-1 buydown is a temporary rate cut. Your rate is 2 percentage points lower in year one, 1 point lower in year two, and back to the full note rate in year three. Someone, often the seller or builder, pays the cost up front into an account. You still have to qualify at the full note rate. When a seller pays, it counts toward the loan's seller concession limit: Fannie Mae allows 3%, 6%, or 9% depending on your down payment (2% on investment property), FHA allows up to 6% of the sales price, and VA limits seller concessions to 4% of the home's reasonable value.
Builders and sellers around Nashville, Franklin, Spring Hill, and Nolensville sometimes offer to pay for a rate buydown. It can make the first two years cheaper. Here is how it works and how much help a seller is allowed to give.
| Year | Rate you pay | What covers the gap |
|---|---|---|
| Year 1 | Note rate minus 2 points | Money in the buydown account |
| Year 2 | Note rate minus 1 point | Money in the buydown account |
| Year 3 and after | Full note rate | You pay the full payment |
Fannie Mae rules for temporary buydowns:
FHA also requires the lender to use the note rate to qualify you. FHA does not allow temporary buydowns on refinances or ARMs.
| Loan | Seller concession limit | Counts toward the limit |
|---|---|---|
| Conventional (Fannie Mae), main home or second home | 3% if over 90% LTV 6% at 75.01–90% LTV 9% at 75% or less | Closing costs, prepaids, and seller-paid buydowns. Based on the lower of price or appraised value |
| Conventional (Fannie Mae), investment property | 2% | Same as above |
| FHA | 6% of the sales price | Origination fees, closing costs, prepaids, discount points, and permanent and temporary buydowns |
| VA | 4% of the home's reasonable value | Items like paying the VA funding fee or paying off your debts. VA does not count normal closing costs toward the 4% |
On Fannie Mae and FHA loans, seller help that is more than your actual costs, or over the limit, is treated like a price cut. That can lower the value used for your loan.
A buydown lowers payments for two years. A price cut lowers the loan for all 30 years. Points lower the rate for the life of the loan. Ask for the math on each option. See are mortgage points worth it?
Want to run your own numbers? Try the free mortgage calculators. They are estimates only, not a loan offer.
It is a temporary rate cut. Your rate is 2 points lower in year one, 1 point lower in year two, and at the full rate from year three on.
No. Fannie Mae and FHA both require the lender to qualify you at the full note rate.
For a main home or second home, Fannie Mae allows 3% if you put down less than 10%, 6% with 10% up to just under 25% down, and 9% with 25% or more down. It is 2% on investment property.
Up to 6% of the sales price. That includes closing costs, prepaids, points, and any buydown the seller pays for.
VA limits seller concessions to 4% of the home's reasonable value. VA does not count normal closing costs toward that 4%.
Not on a Fannie Mae loan. Temporary buydowns are only allowed on main homes and second homes.
Got a builder or seller offering a buydown in Middle Tennessee? I can compare it to a price cut or points. Call me at (615) 495-6594, email travis@heathrowmtg.com, or start an application.
Figures checked October 11, 2026. Rules and rates can change. Examples are for illustration only and are not a loan offer.
