2-1 buydown: a lower payment for the first two years, paid by the seller

The "2-1" describes the steps. Year one is reduced the most, year two is reduced by half as much, and year three is your full payment for the rest of the loan. A 1-0 buydown is the shorter version: one reduced year, then the full payment.

The money that covers the difference is held in an account and applied to your payment each month. It is not a loan and you don't pay it back.

Usually the seller, through a seller concession written into the purchase contract. Builders often offer it too. You can also pay for it yourself, though most buyers want the seller to cover it.

When a house has been sitting, asking for a buydown credit can do more for your monthly budget than the same amount taken off the price. I walk through that math in seller concessions vs a price cut.

• Agency loans (conventional, FHA and VA) for Maine and Florida homes, within each program's seller contribution limits.
• Jumbo loans for higher priced homes, common in Southwest Florida and coastal Maine.
• Non-QM loans for self employed, 1099 and asset based buyers. On the programs I have access to, seller concessions can go up to 6% up to 90% loan to value, which leaves room for a buydown and closing costs.

On most programs you qualify at the full note payment, not the reduced year one payment. The buydown is payment relief, not a way to stretch into a bigger loan. That protects you in year three when the full payment starts.

• You expect your income to rise over the next two years.
• You want breathing room while you furnish, move or sell your last home.
• You may refinance later and want the early savings now.
• The seller is willing to give a credit but won't drop the price much.

If you want a lower payment for the life of the loan instead, a permanent buydown with discount points may fit better. My guide on seller paid buydowns, temporary vs permanent compares the two.