Wondering whether to ask for a 2-1 buydown or lock your rate on a Fulton County home? With rates moving and sellers negotiating case by case, it can be hard to tell which choice sets you up best. You want payment predictability without overpaying up front, and you want to stay competitive in today’s Atlanta market.
In this guide, you’ll learn how a 2-1 buydown and a rate lock work, what each costs, how they affect underwriting, and when each option tends to make sense here in Atlanta. You’ll also get a simple decision checklist you can use before you write your offer. Let’s dive in.
2-1 buydown vs rate lock at a glance
- 2-1 buydown: Someone prepays funds to lower your effective interest rate by 2 percentage points in year 1 and 1 point in year 2. In year 3, your payment resets to the full note rate.
- Rate lock: Your lender fixes your interest rate for a set time window while you close, often 30 to 60 days. Some lenders offer a float-down option for a fee if rates drop before closing.
Both tools can help, but they solve different problems. A buydown eases early cash flow. A rate lock preserves your long-term rate.
How a 2-1 buydown works
A 2-1 buydown is a temporary interest subsidy funded by a third party at closing. The funds are placed in an escrow or trust account and applied to reduce your monthly payments for the first 24 months.
- Year 1: You pay as if your rate is 2 points lower than your note rate.
- Year 2: You pay as if your rate is 1 point lower.
- Year 3 onward: Your payment reverts to the note rate and normal amortization continues.
Buyers use this to soften the first two years of payments, especially when income is rising or when a seller or builder is willing to contribute.
How a rate lock works
A rate lock protects you from market rate increases while your loan is processed. You and your lender agree to a specific rate and a lock period.
- Typical lock windows are 30, 45, or 60 days. Longer locks or extensions usually cost extra.
- Some lenders offer float-down features for a fee or under specific rules if rates improve before closing.
- Your locked rate becomes your permanent rate unless you refinance later.
If permanent payment certainty is your priority, a lock is the straightforward path.
Cash flow example on a $400,000 loan
Here is an approximate illustration of a 30-year loan with a 6.00% note rate.
- Payment at 6.00%: about $2,398 per month.
- With a 2-1 buydown: about $1,909 in year 1 and $2,146 in year 2.
- Savings: about $489 per month in year 1 and $252 per month in year 2.
- Total subsidy: roughly $8,900 over two years.
Actual figures depend on your loan amount, term, and rate. Ask your lender for exact calculations and a written buydown schedule.
What lenders look for
Underwriting and investor rules can affect your choice.
- Qualification rate: Many lenders require you to qualify at the full note rate, not the reduced buydown payment. Some may allow qualification at the subsidized payment if the buydown funds meet investor rules. Confirm early with your lender.
- Documentation: Lenders require a written buydown agreement showing who pays, how much, and how funds are held and disbursed. The contribution typically appears on your Closing Disclosure and is deposited into a lender-controlled account at closing.
If you need the lower payment to qualify, make sure your lender’s rules support that approach before you write the offer.
Seller concessions and program limits
If a seller funds the buydown, it counts toward seller contribution limits that vary by loan program and down payment.
- Conventional: A common framework is 3% of the price with less than 10% down, 6% with 10–25% down, and 9% with at least 25% down. Confirm your investor’s exact rules.
- FHA: Seller concessions are generally limited, often up to 6% of the price, with specific permitted uses.
- VA and USDA: Different rules apply, and some seller-paid fees are restricted.
Your agent and lender should confirm the allowed contribution for your specific loan and include clear language in the contract if you request a seller-paid buydown.
When each option makes sense in Atlanta
Consider a 2-1 buydown when:
- You want lower payments for the first two years to match expected income growth or other cash flow changes.
- The seller or builder is open to concessions, which is more likely in slower submarkets or on select listings.
- You value near-term payment relief more than a locked permanent rate.
Consider a rate lock when:
- You want long-term rate certainty without upfront buydown funds.
- You expect to keep the mortgage for years, not just through the buydown period.
- Your closing timeline fits standard lock windows or your lender offers a reasonably priced longer lock.
- You have access to a float-down feature and believe rates could dip before closing.
Local factors in Fulton County
Market dynamics vary across Atlanta neighborhoods. In strong seller markets, buydown concessions are less common. In slower pockets or with new construction, seller-paid buydowns may be on the table. New builds can have longer timelines that push you toward a longer lock. Condos or homes with HOA or title complexity can also extend the timeline, which may require lock extensions.
If you are shopping in the Tri-Cities, West End, or adjacent intown areas, ask your agent what sellers are offering right now and how long similar deals have taken to close.
How to negotiate a seller-paid buydown
- Put it in the offer: Specify the buydown amount, who pays it, and that the funds will be deposited into escrow per lender rules.
- Confirm program limits: Check the loan’s seller contribution cap so you do not exceed it.
- Coordinate with closing: Make sure the title or closing company can show and disburse the buydown funds correctly on the Closing Disclosure.
Clear, specific language helps avoid last-minute issues that could delay closing.
Common risks to plan for
- Payment reset: Your payment increases in year 3 if you choose a 2-1 buydown. Budget for that step-up.
- Qualification mismatch: If the lender qualifies you at the full note rate, a buydown may not help you pass underwriting when margins are tight.
- Market shifts: If you pay for a buydown and rates later fall significantly, you might have preferred a cheaper lock. If rates spike, a lock protects you beyond the first two years.
Make sure your choice fits both your short-term cash flow and your long-term plan.
A simple decision checklist
Ask your lender:
- Will I be qualified at the note rate or the buydown rate?
- How will a 2-1 buydown be documented and funded for my loan product?
- What lock periods, extension fees, and float-down options are available?
If negotiating a seller-paid buydown:
- Include explicit buydown language in the contract and confirm investor compliance.
- Verify seller contribution limits for your loan program.
- Confirm how the closing company will receive and disburse the funds.
Run the numbers:
- Request lender-produced payment schedules for the permanent rate, with a 2-1 buydown, and with a locked rate if offers differ.
- Compare cumulative payments over your expected holding period.
Consult professionals:
- Talk to your mortgage lender about underwriting and product rules.
- Coordinate with your closing or title company about funds handling.
- Ask a tax advisor about any questions on prepaid interest and deductibility.
Make the choice with a local guide
Whether you lean toward a 2-1 buydown or a rate lock, the best decision starts with a clear view of your monthly budget, your timeline, and how active sellers are in your target neighborhood. If you want a second set of eyes on your numbers or help crafting clean, compliant offer language, our local team is here to help.
Ready to move forward with confidence in Atlanta’s Tri-Cities and nearby intown neighborhoods? Connect with Intown Focus Realty for local guidance and steady negotiation.
FAQs
Who can pay for a 2-1 buydown on an Atlanta home?
- A seller, builder, borrower, or in rare cases a lender can fund it, subject to loan program rules and seller contribution limits.
Does a 2-1 buydown lower my rate permanently?
- No. It reduces the effective payment for two years, then your payment reverts to the note rate in year 3.
Do seller-paid buydowns count toward concessions limits?
- Yes. They generally count toward the allowed seller contribution for your loan program.
Will my lender qualify me at the buydown payment?
- It depends. Many lenders qualify at the full note rate, while some may allow adjustments for documented temporary buydowns. Ask your lender early.
What happens to buydown funds if the deal falls through?
- Buydown funds are typically collected at closing. Your contract should specify how funds are handled if the transaction does not close.
Is a 2-1 buydown smart when rates are high?
- It can ease near-term payments, but compare the upfront cost to the benefit over your expected holding period and consider the chance of future rate changes.
