The National Directory of Certified Public Accountants

Ask A CPA - Mortgages & Loans

What Is A Builder Buy Down Loan ?

A Builder buy down loan is a mortgage loan on newly developed property that the builder subsidizes during the beginning years of the development. The builder uses cash to buy down the mortgage rate to a lower level than the prevailing market loan rate for a period of time. The typical buydown is 3% of the interest rate amount for the first year, 2% for the second year, and 1% for the third year. This type of loan is often referred to as a 3-2-1 buydown loan.

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