How to Get a 3.99% Mortgage Rate Right Now: Buydowns Explained

Interest rates in 2026 are hovering in the upper 5s to mid-6s depending on your credit scores and loan program. But what if you could get a 3.99% rate for the first year, 4.99% the second year, and then go to your original rate for the remaining term, all without costing you a penny out of pocket? That is the magic of interest rate buydowns. As a dual-licensed Loan Officer and Realtor who shops across multiple wholesale lenders, I use this strategy regularly to help buyers save thousands of dollars. Here is how it works.

Prefer to watch? Patrick explains buydowns in detail in this video.

What Is an Interest Rate Buydown?

An interest rate buydown is a strategy where upfront money is paid to the lender in exchange for a reduced interest rate for a specific period, usually the first one, two, or three years. This is different from a discount point, which you as the buyer pay to permanently lower the rate for the entire 30-year term. A temporary buydown gives you a lower payment during the early years, and then the rate steps up to the full note rate.

The key distinction: we want the seller to pay for the buydown through seller concessions, not you. With discount points, the buyer pays upfront to permanently reduce the rate. With an interest rate buydown, the seller's concession funds a temporary rate reduction that lowers your payment in the critical first years of homeownership.

On FHA loans, seller concessions are capped at 6% of the sale price or appraised value (whichever is lower). On conventional loans, the cap ranges from 3% to 9% depending on your down payment. For VA loans, the cap is 4% of the reasonable value. Buydowns count toward these concession limits, so we work within those guidelines to structure the best deal for you.

Three Types of Interest Rate Buydowns

1-0 Buydown (1% below for 1 year)

If your market rate is 5.99%, a 1-0 buydown gives you 4.99% for the first year. The remaining 29 years are at the original note rate of 5.99%. This is the simplest buydown and costs the least.

2-1 Buydown (2% below, then 1% below, then market rate)

This is one of the most popular options. Using a market rate of 5.99% as an example:

• Year 1: 3.99% (2% below market rate)
• Year 2: 4.99% (1% below market rate)
• Years 3-30: 5.99% (full note rate)

3-2-1 Buydown (3%, then 2%, then 1% below)

The most aggressive temporary buydown. Using the same 5.99% market rate:

• Year 1: 2.99% (3% below market rate)
• Year 2: 3.99% (2% below market rate)
• Year 3: 4.99% (1% below market rate)
• Years 4-30: 5.99% (full note rate)

How Seller Concessions Make It Possible

In a balanced market, sellers are often willing to negotiate concessions to help close the deal. On a $300,000 purchase, I am averaging about $10,000 in seller concessions for my clients. The cost to set up a 2-1 buydown on that same $300,000 loan is approximately $6,500. That means we take $6,500 of the seller concessions and allocate it to the buydown fund. The remaining $3,500 goes to reduce your other closing costs, lowering the cash you need to bring to the table.

This is the beauty of the strategy. The seller is paying to lower your rate. You are not writing a bigger check. In fact, your cash-to-close is smaller because the concessions are covering both the buydown and a portion of your transaction costs.

Buydown vs. Discount Points: Know the Difference

A discount point is something you pay to permanently buy down the rate for the full 30-year term. If the market rate is 5.99% and you want a permanent 5.49% rate, you might pay 1.5 points (each point is 1% of the loan amount). That stays with the loan for its entire life.

A temporary buydown is something the seller pays for through concessions. The rate is reduced for the first one to three years only. This is almost always the better option for buyers because it preserves your cash and gives you the lowest payment when you need it most, right after the purchase.

The strategy I recommend: use seller concessions for a temporary buydown to lower your early payments, then refinance into a permanent lower rate when rates drop in the future. That way you get the best of both worlds.

Free 1-0 Buydown Promotion

One of the lenders I work with is currently offering a 1-0 buydown for free. No seller negotiation needed. The lender absorbs the cost themselves. This means if your market rate is 5.99%, you get 4.99% for the first year at no cost to you or the seller. That saves you approximately $180 per month for 12 months.

This promotion is available through select wholesale lenders and is subject to credit approval. I can check current availability when we run your pre-approval. As a mortgage broker, I shop across multiple lending platforms to find the best programs for each client.

Should You Choose a Buydown or Reduce Your Closing Costs?

This is the balancing act every buyer faces. You have a fixed pool of seller concessions. You can use them to:

• Lower your monthly payment by directing a portion of the concessions toward a 2-1 or 3-2-1 buydown.
• Lower your cash-to-close by using all the concessions to reduce your transaction costs and prepaids.
• Split the difference by funding a buydown and using the remaining concessions to lower your check at closing.

The right choice depends on your financial situation. If a lower monthly payment helps you feel more comfortable in the first few years, a buydown makes sense. If preserving cash for moving expenses, furniture, or renovations is more important, you may prefer to minimize your cash-to-close. I work through this decision with every buyer to find the right balance.

Frequently Asked Questions

Patrick Kevin Fagan

Loan Officer and Realtor · AXEN Realty LLC · San Antonio and Texas Hill Country

Licensed Sales Agent · 454749 · TX · NMLS 877741

210-317-6514 | pfagan@nexalending.com | About Patrick

Sincerely, Patrick Kevin Fagan