Seller Concessions vs. a Price Cut: Why a 2/1 Buydown Can Win

When a home has been on the market a while, most buyers ask for a lower price. But a lower price only lowers your payment a little. There may be a better way to spend the seller’s money.

What Is a 2/1 Buydown?

With a 2/1 buydown, the seller pays to temporarily lower your interest rate: about 2% lower in year one and 1% lower in year two, then your regular note rate from year three on. Your loan is qualified at the note rate, so you are not stretching to afford it later.

Why It Can Beat a Price Cut

Take the same seller dollars. A price cut lowers your loan balance slightly, which saves a small amount each month. A buydown can lower your payment much more in the first two years, giving you breathing room while you settle in, furnish the house or build savings. If rates drop, you may be able to refinance.

See It Side by Side

For FHA and conventional buyers, I show the regular payment and the 2/1 buydown payment side by side, along with the estimated cash to close for each. Realtors: this is a great tool for listings that need a nudge. Visit our Realtor Tools page.

Let’s Run Your Numbers

Call or text me at 281-978-2106 or get started on your pre-approval. I will show you every option side by side so you can choose with confidence.

Clifton Saunders, The Mortgage Mentor

Clifton Saunders, NMLS #230688 | New American Funding, NMLS #6606 | Equal Housing Opportunity. Subject to credit approval; not all applicants will qualify. Programs and guidelines change; call or text 281-978-2106 for current details. This article is general information, not tax or legal advice.