A temporary buy down helps a homebuyer by lowering the payment during the first year to two years of the loan. Buy downs are commonly referred to as 1/0 buy down - the interest rate is lowered by 1% in the first year and 0% in the second year; or a 2/1 buy down - the interest rate is lowered by 2% in the first year, 1% in the second year, and 0% in the third year.
Because the cost for the buy down is paid for by the seller or builder, this can be a great way for a homebuyer to purchase a home while they are waiting for rates to come down in the future and perhaps leverage a more buyers market. When it comes to purchasing a home, maximizing affordability is a key consideration for many consumers.