In our ever evolving business of mortgage attraction, lenders have released the 3-2-1 buydown. It offers a lower introductory rate with an associated lower monthly payment. If the current interest rate is 7%, then the 3-2-1 will be 3% less during year 1, so 4%. Then in year 2 it will be 5% and year 3 6%. Sounds great, but here’s the catch: the borrower is qualified at the 7% rate. People think they can buy more home because of the lower introductory rate but that is incorrect. So here’s where this can make sense.

If you are buying a home and are qualified at the prevailing interest rate, you can ask the seller for a seller concession to buy down the rate via a 3-2-1. You as the buyer may not make the buydown, it is aseller cost. You will have lower payments during those first few years allowing you to make improvements, buy furnishings etc. Before maiing an offer, speak with your lender (us?) and your agent so you can get the figures you need for a buydown and write it into your offer.