Buyer & Seller Guide
Rate Buydowns in Tucson
How a temporary buydown and discount points lower a mortgage payment, what each loan program lets a seller pay, what a buydown costs, and how often sellers around Tucson give a concession that can fund one.
The short answer
A rate buydown is money paid at closing to lower a buyer's mortgage payment. A temporary buydown, such as a 2-1, lowers the payment for the first one to three years from an escrow funded at closing; discount points lower the rate for the life of the loan. A seller can pay for either, within each loan program's limit on seller contributions: 3% to 9% of the value on a conventional loan for a home the buyer will live in, depending on the loan-to-value, 6% of the price on FHA and USDA loans, and 4% of the value on a VA loan, where normal closing costs and market-rate points don't count. Every program qualifies the buyer at the full note rate.
Rules as of October 23, 2026, from the sources at the foot of this page.
Two Kinds of Buydown
Temporary: 3-2-1, 2-1, 1-1, 1-0
A temporary buydown lowers the payment for the first years of the loan, then steps up to the full payment the note sets. The name lists the reductions: in a 2-1, the first year's payment is figured at 2 percentage points below the note rate and the second year's at 1 point below, and from the third year the buyer pays the full amount. A 3-2-1 runs three years, a 1-1 two years at 1 point below, a 1-0 one year.
The money is paid at closing into an escrow account, and each month the escrow covers the gap, so the lender always receives the full payment. The note rate itself never changes. That is also why the lender qualifies the buyer at the full payment: the buyer has to be able to afford the loan once the buydown ends.
Permanent: discount points
Discount points are a fee paid at closing for a lower rate on the whole loan. One point is 1% of the loan amount. How far a point lowers the rate is the lender's pricing and changes daily, so compare quotes with and without points on the same day. Points pay off only if the buyer keeps the loan long enough; the break-even calculator below shows how long.
Either kind can be paid by the buyer, the seller, a builder or a lender, within the loan program's rules. When the seller or builder pays, it is a seller concession, and every program limits those.
What a Buydown Costs
A temporary buydown costs the payments it covers: for a 2-1, twelve months of the gap between the full payment and the payment 2 points lower, plus twelve months of the gap at 1 point lower. Beside it, the calculator shows what the same money would save if it came off the loan instead.
Temporary Buydown Cost
Type the loan amount and the note rate from a lender's quote. Nothing here assumes a rate.
A 2-1: 2 points below in year 1, 1 point below in year 2, then the full payment.
Enter a loan amount and the note rate to see the schedule and what it costs.
Discount Points Break-Even
Ask a lender for two quotes on the same day: the rate with no points and the rate with points. One point is 1% of the loan amount. Uses the loan amount and term above.
Enter the loan amount above and both rates to see how long the points take to pay for themselves.
What Each Loan Program Allows
| Loan | Temporary buydowns | Buyer qualifies | What a seller may pay |
|---|---|---|---|
| ConventionalFannie Mae and Freddie Mac | Allowed on a home the buyer will live in or a second home, not on an investment property or a cash-out refinance. Up to 3 years, no more than 3 percentage points below the note rate, rising no more than 1 point a year (Fannie Mae). | At the note rate, not the bought-down rate. | Up to 3% of the value when the loan is more than 90% of it, 6% when it is more than 75% up to 90%, and 9% at 75% or less; 2% on an investment property. The value is the lower of the price and the appraisal. A buydown's cost counts toward the limit (Fannie Mae). |
| FHAHUD | Allowed on a fixed-rate purchase loan; not on a refinance or an adjustable-rate loan. HUD's handbook sets no plan of its own, so ask the lender which buydowns it offers. | At the note rate. | Up to 6% of the sales price toward the buyer's closing costs, prepaid items and discount points, and the limit includes payments for temporary and permanent buydowns. A seller paying the commissions it customarily pays does not count. |
| VADepartment of Veterans Affairs | Allowed on fixed-rate loans. Runs at least 1 year and no more than 3; each year's step up may not be more than the payment change of a 1-point rise in the rate, on the anniversary of the first payment. | At the full payment under the note, without the escrow's help. The buydown can count as a compensating factor when the buyer's other figures are close. | Concessions up to 4% of the home's reasonable value, the value on VA's appraisal. A seller-funded temporary buydown counts, and so do points beyond what the market charges; the buyer's normal closing costs and market-rate points do not. |
| USDAUSDA Rural Development | Allowed when the seller, the lender or another third party funds it — never the buyer. No more than 2 percentage points below the note rate, rising no more than 1 point a year, fully funded at closing. | At the full note rate. | Up to 6% of the sales price, for purposes the program allows. A lender's premium-pricing credit, money for repairs and the seller paying the buyer's agent's commission do not count. |
A 3-2-1 starts 3 points below the note rate, more than USDA allows; the other plans fit every program's limits. FHA sets no plan of its own, so ask the lender which it offers. “Value” and “loan-to-value” mean the loan as a share of the home's value. A lender's own rules can be stricter.
When the Seller Pays More Than the Limit
- Conventional: The extra is treated as a cut in the price, and the loan-to-value is figured again on the lower price.
- FHA: Anything over 6%, or over the buyer's actual costs, is an inducement to purchase and comes off the price dollar for dollar before FHA applies its loan-to-value limit.
- VA: Concessions over 4% are, in VA's words, “excessive, and unacceptable” for a VA-guaranteed loan.
- USDA: Contributions must stay within the limit and pay for a purpose the program allows.
A credit from the lender for taking a higher rate (“premium pricing”) doesn't count toward the limit on a USDA loan or a conventional loan sold to Fannie Mae, nor on an FHA loan as long as the lender isn't the seller, the builder, the developer or a real estate agent in the sale. A price cut is outside every limit: it is not a contribution at all.
How Often Tucson Sellers Give a Concession
The MLS has a field for the concession on every closed sale: the dollars the seller put toward the buyer's costs. It doesn't say what they paid for, so these are closing costs and buydowns together. Closed sales, Oct 2025 – Sep 2026, highest share first.
| Area | Sales with a concession | Median concession | Closed sales |
|---|---|---|---|
| Vail | 77% | $8,651 | 1,026 |
| Rincon Valley | 76% | $8,651 | 653 |
| Corona de Tucson | 75% | $8,000 | 246 |
| Rita Ranch | 70% | $8,275 | 66 |
| Marana | 67% | $8,000 | 1,507 |
| Sahuarita | 67% | $8,790 | 857 |
| Civano | 65% | $6,000 | 37 |
| Tucson Mountains | 58% | $8,000 | 745 |
| Midtown Tucson | 52% | $7,489 | 583 |
| Downtown Tucson | 51% | $7,225 | 51 |
| Dove Mountain | 50% | $9,800 | 255 |
| Sabino Canyon | 48% | $8,800 | 65 |
| Oro Valley | 41% | $6,700 | 1,010 |
| Tanque Verde | 39% | $8,000 | 269 |
| Sam Hughes | 38% | $5,825 | 84 |
| Catalina Foothills | 35% | $6,596 | 1,052 |
| Green Valley | 32% | $4,363 | 1,167 |
| Ventana Canyon | 26% | $2,500 | 91 |
| SaddleBrooke | 25% | $4,000 | 509 |
| Stone Canyon | 24% | $8,796 | 29 |
Updated October 1, 2026 and on the 1st of every month. Concessions: every closed residential sale in the MLS of Southern Arizona (MLSSAZ) for the area, over the twelve months shown, recomputed on the 1st of each month. The share is of the sales where the MLS records a concession amount (zero counts as recorded); the median is among the sales that had one. The MLS records the dollar amount, not what it paid for, so a concession can be closing costs, a buydown or both. Areas with fewer than 20 sales are not shown. What the numbers say about each area: Seller Concessions in Tucson, Area by Area.
If You Sell or Refinance During the Buydown
A buyer who refinances or sells in the first years leaves money in the escrow. Where it goes is set by the loan program and the buydown agreement:
- Conventional: If the loan is paid off, the money is credited to the payoff or returned to the buyer or the lender, as the buydown agreement says. If a buyer assumes the loan, the buydown can carry on (Fannie Mae).
- FHA: The escrow may not go back to whoever funded it if the home is sold or the loan paid off, and it may not be paid to the buyer in cash unless the buyer funded it.
- VA: If the loan is paid off or foreclosed, the money is credited against the buyer's debt; it may never go back to whoever funded it. If a buyer assumes the loan, the escrow keeps paying for them.
- USDA: The money is held in an escrow at a federally or state-supervised financial institution and paid to the lender each month. The handbook doesn't say what happens on an early payoff, so read the escrow agreement.
Buydown or Price Cut?
For a seller, a concession and a price cut cost about the same: the net goes down by the dollar either way. For a buyer they do different jobs. A temporary buydown puts all of the money into the first years' payments and then stops; a price cut lowers the loan, so it trims every payment by a little for as long as the loan lasts, and it doesn't count against the program's limit on seller contributions.
Which is worth more depends on how long the buyer keeps the loan and how tight the first years' budget is. The calculator above sets the two side by side, and 2-1 Buydown or Price Cut? walks through when each one wins.
Frequently Asked
Rate Buydown Questions
What is a 2-1 buydown?+
A temporary buydown that figures the first year's payment at 2 percentage points below the note rate and the second year's at 1 point below; from the third year the buyer pays the full payment the note sets. The difference is paid each month from an escrow funded at closing, usually by the seller or a builder, so the lender always receives the full payment.
Who can pay for a rate buydown?+
The buyer, the seller, a builder or a lender, within the loan program's rules. When a seller or builder pays, the cost counts toward the program's limit on seller contributions. USDA is the exception for temporary buydowns: its handbook says the money may not come from the buyer.
Do I qualify for the loan at the lower payment?+
No. Fannie Mae, FHA, VA and USDA all have the lender qualify the buyer at the full note rate, as if there were no buydown. VA lets the lender count a buydown as a compensating factor when the buyer's other figures are close.
Can a seller pay for a buydown on an FHA or VA loan?+
Yes. On an FHA loan the seller's payment for a temporary or permanent buydown is part of the 6% limit on interested-party contributions. On a VA loan a seller-funded temporary buydown is a seller concession and counts toward the 4% limit; normal discount points paid by the seller do not.
What happens to the buydown money if I refinance or sell?+
It depends on the program. On a VA loan the money left in escrow is credited against the loan when it is paid off and never returns to the seller. FHA forbids it going back to whoever funded it. On a conventional loan sold to Fannie Mae it is credited to the payoff or returned as the buydown agreement says. On Fannie Mae and VA loans, if a buyer assumes the loan, the buydown carries on for them. Read the buydown agreement before closing.
Is a buydown better than a price reduction?+
It depends on how long the buyer keeps the loan. The same money spent on a temporary buydown lowers the first years' payments by much more than a price cut would, then stops; a price cut lowers every payment by a little for the life of the loan and doesn't count against the program's limit on seller contributions. The calculator on this page sets the two side by side for your loan.
Keep Reading
- 2-1 buydown or price cut? What a seller's money buys →
- Seller concession limits by loan type (2026) →
- Seller concessions in Tucson, area by area →
- Beating payment shock as a move-up buyer →
- VA loan assumption in Tucson →
- FHA loan assumption in Tucson →
Sources
- Fannie Mae Selling Guide B2-1.4-04, Temporary Interest Rate Buydowns (August 7, 2024)
- Fannie Mae Selling Guide B3-4.1-02, Interested Party Contributions (May 7, 2025)
- Freddie Mac Guide 5501.6, Interested party contributions (effective July 1, 2026)
- HUD Handbook 4000.1, FHA Single Family Housing Policy Handbook, Update 18 (August 12, 2026): Interested Party Contributions and Inducements to Purchase (II.A.4 and II.A.5), qualifying with a temporary buydown, the buydown escrow, and the refinance and ARM rules
- VA Pamphlet 26-7, Lenders Handbook, chapter 7, topic 7: Loans Involving Temporary Interest Buydowns (July 27, 2023)
- VA Pamphlet 26-7, Lenders Handbook, chapter 8: fees paid by others, and topic 5, Seller Concessions
- USDA Handbook HB-1-3555, chapter 6, Loan Purposes (revised May 5, 2025): interested party concessions and discount points
- USDA Handbook HB-1-3555, chapter 11, paragraph 11.5, Funded Buydown Accounts (revised November 25, 2025)
- Concessions: every closed residential sale in the MLS of Southern Arizona (MLSSAZ) for the area, over the twelve months shown, recomputed on the 1st of each month. The share is of the sales where the MLS records a concession amount (zero counts as recorded); the median is among the sales that had one. The MLS records the dollar amount, not what it paid for, so a concession can be closing costs, a buydown or both. Areas with fewer than 20 sales are not shown.
- This guide summarizes the loan programs' published rules as they read on October 23, 2026. It is general information, not lending, tax or legal advice and not an offer of credit. Tucson Experts is a real estate team with eXp Realty, not a lender: the lender decides which buydown plans it offers and whether a loan qualifies, and a lender's own rules can be stricter than the program's. Confirm the figures for your loan with your lender.
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Asking for a Buydown, or Offering One?
Tell us about the home and the loan. We will show you what sellers in that area have been giving, write the concession into the offer so the lender can apply it, and help you weigh it against a price cut. We are a real estate team, not a lender: your lender sets the buydown's terms.
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