Builder Offering a 2-1 Buydown or a Price Cut? How to Compare in Collin County
By Hilda Avila, REALTOR®, Ebby Halliday Real Estate · Last updated Nov. 9, 2026.
Short answer: A 2-1 buydown lowers your payment for the first two years. The rate is cut by 2 percentage points in year one and 1 point in year two, and then you pay the full payment from year three on. A price cut lowers the amount you borrow for the whole loan. A permanent buydown lowers the loan’s interest rate for the whole term. Which one helps more depends on how long you’ll keep the loan and whether the full payment fits your budget today.
Three ways to use the same builder money
| Price cut | 2-1 temporary buydown | Permanent buydown (discount points) | |
|---|---|---|---|
| What changes | Purchase price and loan amount | Your payment in years 1–2 only | The interest rate on your loan |
| Payment early on | A little lower | Much lower | Lower |
| Payment from year 3 | Still a little lower | Back to the full payment | Still lower |
| Loan balance | Lower from day one | Unchanged | Unchanged |
| If you refinance or sell early | The smaller balance stays with you | Ask your lender how unused buydown funds are handled | Value you haven’t used up yet is lost |
How a 2-1 buydown works
The builder (or a seller) puts money into an account at closing, and that account covers part of your monthly payment for two years. Your loan’s actual rate, called the note rate, doesn’t change. Fannie Mae’s rules say the mortgage documents must reflect the permanent payment terms, and buydowns can last no more than three years, with the rate rising no more than 1 point a year (Fannie Mae B2-1.4-04).
You generally qualify at the full payment. For a fixed-rate loan, Fannie Mae requires the lender to qualify you at the note rate, not the lower bought-down rate (Fannie Mae B3-6-04). Other loan programs have their own rules, so ask your lender how you’ll be qualified.
How a permanent buydown works
With a permanent buydown, someone pays discount points at closing so you get a lower interest rate for the whole loan. One point costs 1% of the loan amount. How much a point lowers the rate depends on the lender, the type of loan and the market (CFPB). Points appear on page 2 of your Loan Estimate, in Section A. Because pricing varies, compare actual written quotes instead of rules of thumb.
Example only: same dollars, two choices
Illustrative math only. These are not today’s rates, an offer or a quote. Principal and interest only; taxes, insurance, HOA and any MUD or PID are extra.
Assumptions: a $400,000 loan, a 30-year fixed loan at an illustrative 7.00% note rate, and the same cash down payment either way.
- Full payment (no incentive): about $2,661 a month
- 2-1 buydown: about $2,147 a month in year 1 (5.00% effective), about $2,398 in year 2 (6.00% effective), then $2,661. Funding that difference costs about $9,323.
- Price cut of the same $9,323: the loan drops to about $390,677, and the payment is about $2,599 for the full term, roughly $62 less a month.
In the first two years, the buydown gives you about $9,323 of payment relief, while the price cut saves about $1,489. After year two, only the price cut keeps lowering your payment, and you started with about $9,300 less debt. The permanent-buydown version can’t be shown honestly without a real lender quote, so ask for one.
Which might fit you (general information, not advice)
- A 2-1 buydown may fit if the full payment already fits your budget and you want breathing room in the first two years.
- A price cut may fit if you’d like a smaller loan balance, think you might sell or refinance sooner, or are worried about the appraisal.
- A permanent buydown may fit if you expect to keep the loan past the break-even point your lender shows you.
- Property taxes: in Texas, the appraisal district sets taxable value. A lower purchase price does not automatically lower your appraisal. Check with Collin CAD or Denton CAD, depending on the address. See Denton CAD vs Collin CAD.
Questions to ask the builder and lender
- Is the incentive tied to using the builder’s preferred lender or title company?
- Can I get a Loan Estimate from that lender and from an outside lender on the same day, for the same loan?
- Is the incentive written into the contract, and what happens if I decline it?
- Can the same dollars go toward a price cut, closing costs or a permanent buydown instead?
- What payment am I qualified at?
- What happens to unused buydown funds if I refinance or sell during the first two years?
- Do any loan-program limits on seller or builder contributions apply to my loan?
Bring your own agent
The builder’s sales representative works for the builder. Many builders want your agent registered at your first visit, so read builder registration before you tour. Hilda is a REALTOR® with Ebby Halliday, not a lender. Loan terms come from a licensed lender. Related reading: negotiating price in Collin County, resale vs new construction and new construction in North Dallas.
FAQ
What is a 2-1 buydown?
Money paid at closing that lowers your payment for two years: 2 points below the note rate in year one and 1 point below in year two. After that you pay the full payment.
Who pays for it?
Usually the builder or seller, as a credit. Loan programs can limit how much a seller or builder contributes, so confirm with your lender.
Does the payment go up after two years?
Yes, to the full payment on your note rate.
Is a buydown better than a lower price?
It depends on how long you keep the loan and on your budget. Compare written quotes for each option.
Will a lower price lower my property taxes?
Not automatically. The appraisal district sets value, so check with Collin CAD or Denton CAD.
Hilda Avila, REALTOR® · TREC #803801 · Ebby Halliday Real Estate, LLC (Broker #257740)