Seller Paid Rate Buydown in Palm Beach County: 2-1 and 3-2-1 Buydowns vs. a Price Cut

A seller paid rate buydown lets you spend money to lower the buyer's mortgage rate instead of lowering your price. With 30-year rates near 7% in September 2026, according to Miami Realtors, that can matter more to a buyer than a few thousand dollars off the sticker. This guide runs the math on 2-1 and 3-2-1 buydowns, compares them with a price cut, and covers the loan rules and appraisal effects every Palm Beach County seller should know.

Key takeaways

• A temporary buydown lowers the buyer's rate for the first one to three years. A permanent buydown lowers it for the life of the loan.
• In our example, about $11,200 pays for a 2-1 buydown that saves the buyer roughly $617 a month in year one. The same money off the price saves about $60 a month.
• Fannie Mae requires lenders to qualify buyers at the full note rate on a temporary buydown, so it does not help them qualify.
• Seller-funded buydowns count toward the loan's concession limit, which ranges from 2% to 9% on conventional loans.
• A price cut lowers the recorded sale price, which can affect future comps. A buydown keeps the price but shows up as a concession.

What a seller paid rate buydown is

A buydown is money paid up front to reduce the interest a buyer pays. When the seller funds it, the cost shows up as a seller concession at closing. The buyer still gets a normal loan. The difference is that part of their interest has been paid in advance.

Temporary buydowns: 2-1 and 3-2-1

A 2-1 buydown cuts the rate by 2 points in year one and 1 point in year two. Then the rate goes back to the full note rate. A 3-2-1 buydown starts 3 points lower and steps up each year for three years. The seller's money goes into an account that covers the gap in the monthly payment.

Fannie Mae sets the limits for conventional loans it buys. The rate cut cannot be more than 3 points, it cannot rise more than 1 point a year, and the plan cannot run longer than three years. Also, the funds must be held in a custodial account, and the plan must be in writing between the person paying and the borrower.

Permanent buydowns

With a permanent buydown, the seller pays discount points so the buyer gets a lower note rate for the whole loan. It costs more per point of rate, but the savings never end. Lenders price points every day, so ask the buyer's lender for a quote before you agree to a dollar amount.

What a seller paid rate buydown costs

A temporary buydown costs roughly the total of the payment gaps it covers. So the math is simple once you know the loan size and rate. For these examples we use round numbers. Your buyer's lender will give the exact figure.

A 2-1 seller paid rate buydown example

Say a buyer pays $600,000 with 20% down and borrows $480,000 at 7% for 30 years. Principal and interest would be about $3,193 a month.

• Year one at 5%: about $2,577 a month, a savings of about $617.
• Year two at 6%: about $2,878 a month, a savings of about $316.
• Year three and later at 7%: about $3,193 a month.

The total cost of those two years of savings is about $11,200. That is just under 2% of the price.

A 3-2-1 example

On the same loan, a 3-2-1 buydown would drop the year-one rate to 4%. That brings the payment to about $2,292, which saves the buyer about $902 a month. The full three-year cost comes to about $22,000, or roughly 3.7% of the price.

Seller paid rate buydown vs. a price cut

Now take that same $11,200 and cut the price instead. The buyer's loan drops to about $471,000. As a result, their monthly payment falls by only about $60. Their down payment also shrinks by about $2,200.

So for the same money, a buydown delivers about ten times the year-one monthly savings. That is why buydowns get attention when rates are high. However, the savings end after two years, and a price cut lasts for the life of the loan.

Which one a buyer wants depends on their plans. Someone who expects to refinance if rates fall may love a buydown. By contrast, a buyer who plans to keep the loan for decades may get more from a permanent buydown or a lower price. A good listing plan offers the choice and lets the buyer's lender run both.

Loan rules that cap a seller paid rate buydown

Every loan type caps how much a seller can contribute. Go over the cap and the lender must cut the price on paper or refuse the extra money.

Conventional loans

Fannie Mae counts a seller-funded buydown as an interested party contribution. For a primary home or second home, the cap is 3% when the buyer puts down less than 10%. It rises to 6% when the buyer puts down at least 10% but under 25%, and to 9% at 25% down or more. On investment property, the cap is 2%. Fannie also requires lenders to qualify the buyer at the full note rate on a temporary buydown.

FHA and VA loans

FHA lets interested parties contribute up to 6% of the price. For VA loans, seller concessions are capped at 4% of the home's reasonable value, and a seller-funded temporary buydown counts toward that 4%. Since each program has its own fine print, have the buyer's lender confirm the plan before you sign.

Remember that the cap covers all concessions together. If you are already paying some closing costs, a buydown may push you over. Our guide to how seller credits work explains how concessions stack.

How buydowns and price cuts affect the appraisal

A price cut lowers the sale price that goes on record. Future buyers and appraisers in your neighborhood will see that lower number as a comp. In a small community, one low sale can weigh on the next few.

A buydown keeps the recorded price higher. Still, appraisers look at concessions on comparable sales and may adjust for them. So a buydown does not hide value. It mainly shapes how the deal reads on paper and how the buyer's payment feels in the early years.

The appraisal of your own home still has to support the contract price. If it comes in low, the buydown does not fix that gap. Price the home on recent sales first, then use the buydown to stand out.

Competing with builder rate incentives

New construction is a real rival in parts of our market, especially in Port St. Lucie and the western suburbs. Builders often advertise below-market rates, frequently through their own lenders. Fannie Mae notes that some builder arrangements made with lenders before any sale fall outside the usual concession limits, which helps explain how they can offer such low rates.

A resale seller cannot always match that. However, you can close the gap. A 2-1 buydown on a resale home lets your listing say something buyers are already hearing from builders. Pair it with what a resale offers, like a mature yard, an established neighborhood and no wait for construction. For broader context, see our look at how interest rates and prices move together.

When a seller paid rate buydown makes sense

A buydown tends to work best in a few situations:

• Your home sits in a price band where buyers are stretched on the monthly payment.
• Nearby builders are offering rate deals that pull buyers away.
• You want to protect your recorded price for the sake of your neighborhood's comps.
• Your home has sat for a while, and a small price cut has not moved buyers.

Meanwhile, a price cut often works better when the home is clearly priced above the market, or when most buyers in your band pay cash. In Palm Beach County, Miami Realtors reported that 48.1% of August 2026 sales were cash. Cash buyers get nothing from a buydown. So in a luxury pocket of Boca Raton, price may matter more than rate.

How to offer a buydown in your listing

First, decide on a dollar amount, not a rate. Rates change daily, so a promise of "5% for the first year" can cost more by closing day. Instead, offer a set credit, such as up to $11,000 toward a rate buydown, and let the buyer's lender design the plan.

Next, put the offer where buyers will see it. Your agent can mention it in the listing remarks, in showing notes and in ads. Then write the terms into the contract so the amount, the purpose and the deadline are clear. Finally, ask your agent to compare every offer on net to you, since a buyer who asks for a buydown and full price may still beat a lower offer with no concessions.

Frequently asked questions

Who holds the buydown money?

For conventional loans sold to Fannie Mae, the funds go into a custodial account kept apart from the lender's own money. Each month, the account covers the gap between the reduced payment and the full payment.

Does a seller paid rate buydown help the buyer qualify?

A temporary one usually does not. Fannie Mae requires lenders to qualify the buyer at the full note rate. A permanent buydown lowers the note rate itself, so it can help.

Can I offer a buydown to an investor?

Not a temporary one on a Fannie Mae loan. Fannie allows temporary buydowns only on principal homes and second homes. Investors may still use discount points within the 2% concession cap.

What happens to unused buydown money if the buyer refinances early?

That depends on the written buydown agreement and the loan terms. Ask the buyer's lender to explain it before closing so nobody is surprised later.

Sources

• Fannie Mae Selling Guide, Temporary interest rate buydowns
• Fannie Mae Selling Guide, Interested party contributions
• HUD FHA Resource Center, What costs can a seller or other interested party pay
• Veterans United, The VA seller concession rule
• Miami Realtors, Palm Beach County August 2026 market report

Weighing a buydown against a price cut? We will run both options for your home and show what each one leaves you at closing. Request a personalized seller net-proceeds sheet or check what your home is worth. Buying instead? Ask a buyer's agent how to request a buydown in your offer.