1. What is FHA 2/1 Buydown?

The FHA 2/1 Buydown is a mortgage financing option where the interest rate is reduced by 2% in the first year and 1% in the second year before returning to the base rate for the remaining loan term. This helps borrowers with initial affordability.

2. How Does the Calculator Work?

The calculator uses the FHA 2/1 buydown formula:

Where:

• Base Rate — The standard mortgage interest rate
• Year1 Rate — First year discounted rate (Base - 2%)
• Year2 Rate — Second year discounted rate (Base - 1%)
• Year3+ Rate — Permanent rate from third year onward

3. Benefits of FHA 2/1 Buydown

Details: This buydown structure provides lower initial payments, making homeownership more accessible during the first two years when financial adjustments to homeownership are often most challenging.

4. Using the Calculator

Tips: Enter the base mortgage rate in percentage format. The calculator will automatically compute the discounted rates for years 1 and 2.

5. Frequently Asked Questions (FAQ)

Q1: Who qualifies for FHA 2/1 buydown?
A: Borrowers must meet standard FHA loan requirements. The buydown is typically funded by the seller, builder, or lender as an incentive.

Q2: Are there additional costs for buydown?
A: Yes, the buydown requires an upfront subsidy payment to cover the interest rate difference during the first two years.

Q3: What happens after year 2?
A: The mortgage rate returns to the original base rate and remains there for the remainder of the loan term.

Q4: Can I refinance during the buydown period?
A: Yes, but you may lose the remaining buydown benefits if you refinance before the buydown period ends.

Q5: Is this available for all loan types?
A: The 2/1 buydown is specifically designed for FHA loans and may have different availability for conventional or other loan types.