Temporary Rate Buydowns
2-1 and 1-0 buydowns in Ohio — a lower payment for your first two years, usually on the seller's dime.
A temporary buydown is the most useful tool in a rate environment like 2026 and the least understood. It cuts your rate by two points in year one and one point in year two, the seller or builder typically funds it, and you still qualify at the full rate — so it's a cushion, not a gamble. This is the play I run more than any other. Here's exactly how it works.
Closings average about 13 days · No SSN or credit pull to start
The whole idea in four numbers
Take a $300,000 loan at a 6.5% note rate — a normal Cincinnati purchase in 2026. The full principal-and-interest payment is $1,896.20 a month. With a 2-1 buydown, year one runs at 4.5% and year two at 5.5%:
$1,520
Year 1 payment at 4.5%
$1,703
Year 2 payment at 5.5%
$1,896
Year 3+ at the 6.5% note rate
$6,828
Total buydown cost (2.28% of loan)
Computed September 2026 on a $300,000 30-year fixed at 6.5%, principal and interest only. Illustrative rate, not a quote.
That $6,828 is the sum of every month's discount — $376.15 a month in year one ($4,513.78), $192.84 a month in year two ($2,314.04). It's deposited into a custodial account at closing and the servicer draws from it each month to fill in the gap. Your rate never changes; your note says 6.5% from day one. The account is doing the paying for two years.
(2.28% of the loan)
Year 3+ is the permanent note rate. The $6,828 buydown cost is the sum of every monthly discount, deposited at closing — usually from a seller or builder credit. You qualify at the full 6.5% rate. Illustrative, 30-year fixed, principal & interest only.
(0.77% of the loan)
A 1-0 buydown on the same loan drops year one to 5.5% ($1,703.37) and costs $2,314.04 — about 0.77% of the loan. It's the lighter ask when a seller won't go to 2.28%, and it still buys a year of breathing room. Illustrative, 30-year fixed, principal & interest only.
Who pays, and why the seller usually says yes
Technically a buydown can be funded by a seller, a builder, a lender (through a rate credit), a gift, or an employer program. In practice, on almost every one of my files it's the seller or builder. The reason is negotiation math. A $7,000 price reduction on a $300,000 house lowers the buyer's payment by about $44 a month forever. A $7,000 seller-funded 2-1 buydown lowers it by $376 a month in year one and $193 in year two. Same money out of the seller's pocket, roughly eight times the first-year impact for the buyer — and the seller still gets to say the house sold at full price, which matters to them and to the neighborhood comps.
The agency rules that shape the ask: Fannie Mae and Freddie Mac cap seller and other interested-party contributions at 3% of the price when you put down less than 10% on a conventional loan, 6% at 10% to 25% down, and 9% at 25% or more. FHA caps them at 6%. Buydown funds count inside those caps. So on a $300,000 conventional purchase with 5% down, the seller can contribute up to $9,000 total — enough for a $6,828 2-1 buydown plus a couple thousand toward closing costs.
Builders are the other big source, especially in Warren County and Butler County new construction, where "rate buydown incentives" are often advertised outright. When a builder offers one through their preferred lender, I'll price the same loan at Coast 2 Coast so you can see whether the incentive is real or whether it's baked into a higher rate somewhere else.
You qualify at the real rate — that's the point
Every agency program — Fannie Mae, Freddie Mac, FHA — requires the lender to qualify you at the full note rate, not the bought-down rate. Fannie's guideline says it plainly: qualify the borrower "based on the note rate without consideration of the bought-down rate." This is what makes a temporary buydown structurally different from the adjustable-rate loans that hurt people in 2007. There is no reset to a payment you were never approved for. The year-three payment is the one underwriting already said you can carry; years one and two are a discount on top of it.
What the buydown gives you is time. Time to furnish the house without a credit card. Time for the raise you're expecting. Time to let a spouse finish a degree. Or time for rates to move — which brings up the honest part.
The refinance thesis, and the honest risk
Most buyers who choose a 2-1 buydown are quietly betting on one of two things: that their income will be higher in three years, or that rates will be lower and they'll refinance into a cheaper permanent loan before the buydown runs out. Either can be true. Neither is guaranteed. Here's how I want you to think about it:
- If rates fall: you refinance in year two or three, the buydown cost that was the seller's money anyway is largely applied to your principal at payoff, and you never pay the full 6.5% payment. Best case.
- If rates stay flat: you pay $1,896 from year three on — the payment you were approved for — having saved $6,828 in the first two years. Still a clear win versus no buydown.
- If rates rise: you keep your 6.5% loan, which now looks good, and you've still saved $6,828. The only person who lost is the one who assumed a refinance was a sure thing and stretched to a payment they can't carry at the note rate — which underwriting is designed to prevent.
The failure mode isn't the buydown. It's spending the year-one savings as if it were permanent. My advice on every file: bank the difference in year one, at least half of it in year two, and you walk into year three with a cushion whatever rates do.
Temporary vs permanent: which buydown wins?
A permanent buydown means paying discount points at closing to lower the rate for the life of the loan. It's the right answer for some buyers, and the wrong reflex for many. The comparison below shows the cost of the three temporary structures on the same $300,000 loan; the cost of points changes with the market and the lender, so I price those live rather than print a number that's wrong by Friday.
Computed September 2026; principal and interest only. The 3-2-1 rarely fits inside a 3% conventional seller cap, which is why the 2-1 is the workhorse in Ohio.
| Temporary 2-1 buydown | Permanent buydown (points) | |
|---|---|---|
| What changes | Your payment, for two years | Your rate, for the life of the loan |
| Size of the discount | Large: 2 points in year one | Small: typically a fraction of a point per point paid |
| Who usually pays | Seller or builder | You, or a seller credit |
| Best if you'll | Refinance or move within a few years, or expect income growth | Hold the loan a long time at today's rate |
| If you pay off early | Unused funds typically credited to principal | Points are spent — no refund |
| Qualifying | At the note rate | At the reduced rate |
How I structure it in a Cincinnati offer
- 1 Before the offer
Size the ask
I run the 2-1 and 1-0 on your real loan amount and give your agent the exact dollar figure — not a percentage the listing agent has to decode.
- 2 The offer
Credit, not price cut
The offer asks for a seller credit "toward buyer's closing costs and prepaids, including a temporary buydown." Full price stays on the contract.
- 3 Under contract
Lock and disclose
The buydown is disclosed on your Loan Estimate; the funds are set up in the custodial account at closing.
- 4 Closing
Year one begins
Your first statement shows the reduced payment. I text you the year-two and year-three dates so nothing surprises you.
Greater Cincinnati homes went pending in a median of nine days in July 2026 — the ask lands better on a house that's been listed three weeks than on a fresh listing with multiple offers. Your agent and I pick the spots.
One more Ohio-specific note. Greater Cincinnati's median sale price was $329,450 in July 2026, up 1.4% year over year but with prices up 4.9% year-to-date — a market that's steady rather than frantic. That's the environment where buydown credits get negotiated: enough demand that sellers hold price, enough supply that they'll pay to close. Columbus, with the highest July inventory in over a decade at 2.4 months, is even friendlier to the ask.
Why this is my specialty
I started originating in 2025, straight into a market where the rate on the screen scared people out of houses they could afford. The buydown is the tool that turns "we'll wait for rates to drop" into "we'll buy now and let the seller pay for the wait." It works on first homes with OHFA assistance, on FHA loans, on conventional loans and on second homes. Send me the price and your loan amount and I'll have the year-by-year numbers back to you before you finish the showing.
Figures current as of September 2026 — programs and limits change; I re-verify everything at application.
Napkin math, upgraded
Run your own 2-1 or 1-0 buydown
Loan amount and note rate in, year-by-year payments and the total buydown cost out — the number you'll ask the seller for.
Illustrative estimates only — not a rate quote, an offer, or a commitment to lend. Your actual figures depend on your full scenario. More tools on the calculators page.
Real questions
Things people ask Zach about this
What is a 2-1 buydown, in plain English?
Your loan is written at the normal rate — say 6.5% — but for the first year you pay as if the rate were 4.5%, and in the second year as if it were 5.5%. From year three on you pay the real 6.5%. The difference between the real payment and the reduced payment for those two years is deposited into an escrow account at closing, usually by the seller or builder, and the servicer draws from it each month. A 1-0 buydown is the same idea for one year at one point lower.
Who pays for the buydown?
In practice almost always the seller, the builder, or the lender through a credit. Under Fannie Mae and Freddie Mac rules the funds sit in a custodial account and interested-party money counts against the normal seller-contribution limits — 3% of the price on a conventional loan with less than 10% down, 6% on FHA. That's why I structure the ask as part of your offer: on a $300,000 conventional purchase, a 2-1 buydown costs about $6,828, which fits inside a 3% credit of $9,000 with room for closing costs.
Do I qualify at the lower rate?
No, and that's the safety feature. Fannie Mae, Freddie Mac and FHA all require you to qualify at the full note rate. So the year-three payment is one you've already been approved to afford; the first two years are simply cheaper. There's no reset shock the way there was with old adjustable-rate loans, because your rate never changes — only who's paying part of it.
What happens to the buydown money if I refinance or sell early?
The buydown account belongs to the loan. If you pay the loan off early — a sale or a refinance — the unused balance is typically applied to your principal at payoff, so it isn't lost. Confirm the exact treatment on your program at application; it's one of the questions I ask the lender before we lock.
Is a 2-1 buydown better than paying points for a permanent lower rate?
It depends on how long you keep the loan. Points buy a small permanent reduction; a 2-1 buys a big temporary one. If you expect to refinance within a few years — because rates fall or your income rises — the temporary buydown usually returns more per dollar. If you'll hold the loan for a decade at today's rate, permanent points can win. I run both on your actual loan the same day so you're choosing between two real numbers, not two theories.
Can I use a buydown on an FHA or VA loan in Ohio?
Yes on FHA — you still qualify at the note rate and the cost counts inside the 6% seller-contribution cap. VA loans allow temporary buydowns as well, with the cost counting against VA's seller-concession limits. What you can't do under agency rules is put a temporary buydown on an investment property or a cash-out refinance.
Keep reading
Related lending
First-time buyer programs in Ohio — pair OHFA assistance with a seller-paid buydown →Conventional loans in Ohio — seller-credit limits that govern the buydown →FHA loans in Ohio — buydowns inside the 6% seller cap →Refinancing an Ohio home — the exit plan most buydown buyers are counting on →Ohio mortgage calculators — buydown, payment and breakeven tools →Where Zach lends
2-1 and 1-0 buydowns across Ohio & California
No pressure, no credit pull
Run your buydown scenario by Zach.
Send the shape of it — what you’re buying, roughly what you earn, where you’re at. Zach reads every one personally and gets back to you the same day, nights and weekends included.
Nothing sensitive lives on this form: no Social Security number, no paperwork, and your credit isn’t touched until you say so. Equal Housing Opportunity. Zachary Bates, NMLS #2687902 · Coast 2 Coast Mortgage, NMLS #376205.