A softer start. A clear payment plan.

How do 3-2-1, 2-1 and 1-1 buydowns compare?

The numbers tell you how the smaller payment is calculated each year. The lender uses a rate below the rate in your loan agreement, often called the “note rate.” Money set aside at closing covers the difference. These examples describe fixed-rate loans and the part of the payment that repays the loan and interest.

These are percentage points of interest rate. They are not a percentage discount on your payment or the discount points you pay to lower a rate. A 1-1 lasts two years; a 1-0 lasts one. Confirm the lender’s written schedule. Sources: Fannie Mae’s 3-2-1 explanation, Freddie Mac’s 2-1 explanation, and Rocket Mortgage’s 1-1 explanation. A source’s example is not a promise of LMB product availability.

Who pays for a temporary buydown?

A seller, builder or lender may pay for it, if the loan’s rules allow. Ask who puts in the money and whether taking the offer changes your other costs. You may be able to use a seller’s contribution in a different way.

The money set aside covers the gap between the full loan-and-interest payment and your smaller share. It does not lower your taxes, home insurance, homeowners association (HOA) dues or mortgage insurance. Include those bills in your budget.

Do I qualify using the lower starting payment?

For loans covered by Fannie Mae’s buydown rules, the lender checks whether you qualify using the full rate in your loan agreement. The temporary help does not reduce what you owe under that agreement, even if the help becomes unavailable. Your loan officer can explain the rules for other loans.

Build your budget around the full payment. The early help can give you room for moving costs or rebuilding savings. You should not need a future raise or refinance to afford the loan.

Would another use of the credit help more?

Ask to compare four choices: temporary payment help, paying an upfront fee for a lower rate, help with closing costs or a lower purchase price. Not every choice will be available. Ask for the cost and payment of each option that is.

Paying discount points can lower the loan’s rate. A temporary buydown only helps with payments for a set time. Read about rates, APR and points.

For the same loan, a 3-2-1 gives more early payment help than a 2-1 or 1-1, but needs more money upfront. A 1-1 keeps your share of the loan-and-interest payment the same for two years. Ask to see each step in dollars, including the first full payment.

What if I sell or refinance early?

Ask what happens to any money left in the buydown account. Do not assume you get a cash refund; the written agreement and loan rules decide that.

Refinancing means getting a new loan, with a new approval and possible closing costs. It may not be available when you want it. If you are also considering an adjustable rate, see how an ARM works.