A 2-1 buydown means the note rate is reduced by 2 percentage points in year 1 and by 1 point in year 2, and then the note rate applies. St. George buyers often ask the seller to fund that cut. The seller concession rate buydown Utah lenders will accept still depends on the loan program and the loan-to-value, so confirm the cap with the lender before you write it into the offer.
There is no single concession cap for every Utah loan. A number you saw on another file can be wrong for yours. The lender on this contract is the person who can say what this program allows.
What you pay each year
The note rate is the rate on the mortgage note. A 2-1 buydown does not rewrite that rate into a lower permanent rate. It subsidizes the payment for two years with money set aside at closing.
In year 1 you pay as if the rate were 2 percentage points lower. In year 2 you pay as if it were 1 point lower. In year 3 and after, you pay the note rate, with no subsidy left to soften it.
| Year | Rate you pay | Where the difference comes from |
|---|---|---|
| Year 1 | Note rate minus 2 percentage points | The buydown funds |
| Year 2 | Note rate minus 1 percentage point | The buydown funds |
| Year 3 and after | The note rate | Your payment, with no subsidy |
If you sell or refinance while the subsidy is still running, ask the lender what happens to unused buydown funds. Do not assume that money comes back to you as a check. Get the answer from the loan program, in writing, before you count on it.
How a seller concession funds the buydown
A seller concession is money the seller agrees to credit at closing. It can pay allowable closing costs, and it can fund a temporary buydown, when the loan program allows that use. The seller pays it from proceeds, not from a separate pile of cash outside the price.
On a Washington County resale, put the request in the offer. Do not save it for the signing table. What sellers already pay by custom is a different list, and it is covered in this guide to seller closing costs.
Write the concession as a dollar amount the lender can document. Say that it may be used for the 2-1 buydown and allowable closing costs, and that it cannot exceed the lender’s limit. A vague promise of help with the rate is harder to underwrite.
The cap depends on the loan program and the loan-to-value. A larger down payment can change the ceiling on some programs. Ask your lender for the ceiling on this file, and do not let a round percentage from a different loan type wander into the contract.
The appraisal still has to support the price
If you raise the contract price so the seller can pay the concession, the home still has to appraise. The lender typically bases the loan on the lower of the price or the appraised value. A higher price that does not appraise becomes an appraisal gap.
You then bring cash, renegotiate, or cancel only if the Utah REPC still gives that right. That trade is explained in this guide to appraisal gaps in St. George. A buydown that breaks the appraisal is not a savings.
What to ask the lender before you write the offer
Ask these questions and write down the answers. The buydown is only useful if you can live with the note-rate payment when the subsidy ends.
- Will this loan program allow a 2-1 buydown funded by the seller?
- What concession cap applies at my loan-to-value?
- What will the payment be in year 1, year 2, and at the note rate?
- Do I have to qualify at the note rate, not only at the reduced year-1 payment?
The loan is documented in a note and secured by a deed of trust. The buydown agreement is an extra document. It does not replace either one, and it does not insure your ownership.
Plan the paperwork inside a Utah buyer closing timeline, and keep the concession inside the loan and due diligence dates on the REPC. A rate subsidy also does not replace title insurance for a Utah buyer. Read that coverage on its own.
Whetzel Homes Collective will shape the concession ask with your lender’s cap in hand, not with a guessed percentage. Call (435) 334-1544 or email hello@whetzelhomes.com, Monday to Friday, 9:00 a.m. to 8:00 p.m., and Saturday, 10:00 a.m. to 4:00 p.m. Mountain Time. You can also write through the contact page.
Frequently asked questions
What does a 2-1 buydown change in year 1 and year 2?
The note rate is reduced by 2 percentage points in year 1 and by 1 point in year 2. After that, the note rate applies. The buydown subsidizes the payment and does not rewrite the note into a permanently lower rate.
Can a St. George seller pay for a 2-1 buydown?
Yes, if the seller agrees and the loan program allows the credit to be used that way. Seller concessions are the usual source of the subsidy. The concession still has to fit the lender’s rules for that file.
Is there one seller concession cap for every Utah loan?
No. The cap depends on the loan program and the loan-to-value, so conventional, FHA, and VA loans do not share one ceiling. Confirm the cap with your lender before you write a dollar amount into the offer.
Will my house payment stay lower after year 2?
No. In year 3 and after you pay the note rate, so budget for that payment before you accept the buydown. Ask the lender whether you must qualify at the note rate, not only at the reduced year-1 payment.
What if I raise the price so the seller can fund the buydown?
The home still has to appraise for the contract price. The lender typically bases the loan on the lower of the price or the appraised value. A shortfall is an appraisal gap, and you cover it, renegotiate it, or cancel only if the REPC still allows that.
