In a 2/1 buydown, the interest rate is reduced by 2% in the first year and then 1% in the second year before adjusting to the full rate in year three.
Example: If your final rate is 6.5%, you’ll pay 4.5% in year one, 5.5% in year two, and then 6.5% starting in year three.
The cost of the buydown is typically paid by the seller or builder as a concession—not out of your pocket.
You’re still qualified for the full rate when you get the loan, so lenders know you can afford it long-term.