A: A Rate Relief buydown is a temporary adjustment that lowers your starting mortgage interest rate and monthly payment for 1-3 years. In a 3-2-1 buydown, your rate is 3% lower in year one, 2% lower in year two, and 1% lower in year three. After the buydown period, the rate returns to your original "note rate." For example, with a 6.99% note rate, you'd pay 3.99% (year 1), 4.99% (year 2), 5.99% (year 3), then 6.99% for the remaining loan term.

A: The buydown must be paid by the seller, builder, or lender - not the buyer. This is typically structured as a seller credit at closing. The credit amount (usually 0.6-3.6% of purchase price) goes into an escrow account that subsidizes your monthly payments during the buydown period. This makes it an excellent negotiating tool when making offers.

A: You must qualify at the full note rate, not the temporary buydown rate. This is actually a safety feature that protects you from payment shock and ensures you can afford the loan when it reaches the permanent rate. Unlike risky ARM products, this qualification requirement ensures sustainable homeownership while still giving you lower initial payments.

A: Yes, you can refinance at any time. If you refinance before the buydown period ends, any remaining prepaid interest is typically credited toward your loan payoff at closing. With ETHOS Lending's no-cost refinance option available during the first 3 years, you can easily take advantage if rates drop significantly.

A: A buydown maintains your fixed-rate mortgage - it simply reduces payments temporarily. Your note rate never changes. An ARM's rate adjusts periodically throughout the entire loan term based on market indices. With a buydown, you know exactly what your payment will be each year, providing certainty that ARMs don't offer.

A: If you sell before the buydown period ends, any remaining prepaid interest in the buydown account can be applied to your loan principal at payoff. This reduces the amount you owe when selling, which is an added benefit. The monthly savings you enjoyed while owning the home, plus this principal reduction, make buydowns particularly attractive for buyers who may relocate within 2-3 years.

A: In a rising rate environment, buydowns help buyers afford more home by reducing initial payments when rates are high. They're particularly attractive when buyers expect rates to fall within a few years (allowing refinancing) or anticipate income growth. Sellers benefit too - offering a buydown often generates more buyer interest than a simple price reduction of the same amount.