01
The note rate does not disappear
The loan documents establish the permanent note rate. The buydown fund supplements the reduced payments during the defined period.
02
Plan for the payment step-up
A 1-0 or 2-1 structure changes early cash flow but not the long-term obligation. Build the budget around the full payment rather than relying on a future refinance.
03
Funding must be permitted
Builders, sellers, or other eligible parties may fund a buydown when the program and lender allow it. Contract language, disclosures, and the source of funds matter.
04
Compare the alternative use of money
The same funds might support a price reduction, permanent points, closing costs, or another concession. Compare payment, cash to close, break-even, and flexibility.
Frequently asked questions
Questions that add to the answer
Does a temporary buydown lower the loan balance?
The payment subsidy does not by itself reduce the original principal balance like an equivalent down payment would.
Can I qualify using the reduced first-year payment?
Qualification generally follows the applicable program and lender rules, often using the permanent terms rather than the subsidized payment.
What happens if I refinance or sell early?
Treatment of remaining buydown funds depends on the agreement and loan documents; review it before closing.
Authoritative sources
Sources reviewed September 9, 2026
Program rules and public guidance can change. The current source and the review of the actual borrower, property, and transaction control.
Related resources