What a rate buydown actually is
When a seller agrees to a rate buydown, they are not handing you a lower price. They are contributing money at closing that goes toward reducing your mortgage interest rate. That distinction matters. A price cut changes what you finance. A buydown changes what you pay each month without changing the loan balance.
Instead of only talking about the price, we're looking at a way to make the monthly payment easier for the buyer, for you.
That is the whole idea in one sentence. For a buyer who is stretching to make a monthly payment work, a lower rate can be more useful than a lower price, because the monthly number is what actually shows up in your budget every month.
Temporary versus permanent: which is which
A permanent buydown uses discount points. Each point equals 1% of the loan amount and typically reduces your rate by 0.25%. You pay more at closing and carry a lower rate for the full life of the loan. It makes sense if you plan to stay in the home long enough to recoup that upfront cost.
A temporary buydown is different. The rate reduction only lasts for one, two, or three years. The most common version is the 2-1 buydown. In year one, your rate is 2% lower than the note rate. In year two, it is 1% lower. From year three onward, you pay the full rate. There is also a 3-2-1 structure, which adds a third year at a 3% reduction before stepping up each year to the permanent rate.
Temporary buydowns are generally available on conforming conventional and FHA loans. They are typically not available on jumbo mortgages, so if your loan size is above the 2026 conforming limit of $832,750, this particular tool may not apply to you.
What is behind a savings number like $500 a month
A reduction of roughly $100 to $200 per month is typical for each 1% drop in rate, depending on the loan balance. A savings figure close to $500 suggests either a significant rate reduction, a higher loan amount, or both. The exact math depends on the specific loan size, the note rate, and the structure of the buydown being offered.
That context matters because no two situations produce the same number. If you are interested in a specific property and want to know what a seller-paid buydown would actually do to your payment, the right move is to run the numbers with a lender using your real loan amount and the rate available to you today.
How the seller contributes and what the rules allow
A seller-paid buydown is a form of seller concession. The seller credits the buyer money at closing, and that money is used to fund the buydown account or purchase discount points. The buyer does not receive cash. It goes directly toward the rate reduction.
There are limits. On FHA loans in 2026, the seller can contribute up to 6% of the lesser of the sales price or appraised value. That 6% can cover discount points and interest rate buydowns. On conventional loans, seller credits follow Fannie Mae rules. They cannot be used for the down payment, reserves, or the minimum borrower contribution. They can be used for closing costs, which include buydown costs.
More sellers are open to these conversations right now. Active listings are up nearly 8% year over year nationally, and homes are sitting longer before going under contract. That has made seller concessions more common and more negotiable than they were a couple of years ago.
Who this is and is not for
A temporary buydown works best for a buyer who expects their income to grow in the next few years, or someone who wants lower payments in the early years while they settle in. The rate will rise after the buydown period ends, so you need to be able to afford the full payment when it does.
A permanent buydown works better for someone who plans to stay long-term and wants the simplicity of a lower rate every single month, not just for a season.
Neither option is right for every buyer. But if you have been looking at a home and the payment feels just out of reach, it is worth asking whether a seller-paid buydown is on the table before you walk away.
If you want to know how the numbers would look for your situation, reach out directly and I can walk through it with you.