A mortgage rate buydown lets you start with a lower interest rate in the early years of your loan — reducing your monthly payment while rates remain elevated and you wait for the right time to refinance.
At DiVita Home Finance, we offer 3-1 buydowns — not just the standard 2-1 buydown most lenders offer. And unlike most brokers, we can structure a 3-1 buydown on jumbo loans and bank statement loans, making this strategy available to luxury buyers and self-employed borrowers across California.
📞 Call (800) 239-1103 to build a buydown strategy for your purchase.
What Is a Mortgage Buydown?
A buydown is a financing arrangement — typically paid for by the seller, builder, or lender — where funds are deposited into an escrow account upfront to temporarily reduce your interest rate. The money covers the difference between your reduced payment and the full payment each month during the buydown period.
When the buydown period ends, your rate adjusts to the permanent note rate. If rates have dropped by then, you refinance and never pay the full rate at all.
The 3-1 Buydown: DiVita’s Signature Offer
Most lenders only offer a 2-1 buydown. DiVita Home Finance offers the 3-1 buydown, which gives you a bigger rate reduction in Year 1 and more total savings over the buydown period.
| Year | 3-1 Buydown Rate | 2-1 Buydown Rate | Note Rate |
|---|---|---|---|
| Year 1 | 3% below note rate | 2% below note rate | — |
| Year 2 | 2% below note rate | 1% below note rate | — |
| Year 3 | 1% below note rate | Full note rate | — |
| Year 4+ | Full note rate | Full note rate | Full note rate |
3-1 Buydown Example on a $900,000 California Home
Assume a note rate of 7.0% on a $720,000 loan (20% down on a $900,000 purchase):
| Year | Effective Rate | Monthly Payment | Monthly Savings |
|---|---|---|---|
| Year 1 | 4.0% | $3,437 | $1,397 saved/month |
| Year 2 | 5.0% | $3,864 | $970 saved/month |
| Year 3 | 6.0% | $4,317 | $517 saved/month |
| Year 4+ | 7.0% | $4,834 | — |
Total savings over the 3-year buydown period: approximately $34,608. The seller deposits this amount into escrow at closing to fund the reduced payments.
3-1 Buydown on Jumbo Loans
Most lenders restrict buydowns to conforming loans. DiVita Home Finance can structure a 3-1 buydown on jumbo loans — including luxury properties in Marin County, the San Francisco Bay Area, Napa, Palm Springs, and throughout California.
For a $2,000,000 California home with a $1,600,000 jumbo loan at 7.25%:
- Year 1 at 4.25% saves approximately $3,800/month
- Year 2 at 5.25% saves approximately $2,600/month
- Year 3 at 6.25% saves approximately $1,300/month
- Total 3-year savings: over $90,000
On a luxury purchase, a 3-1 buydown can be the difference between comfortably affording the home today and waiting on the sidelines.
3-1 Buydown on Bank Statement Loans
Self-employed borrowers who qualify through a bank statement loan can also use a 3-1 buydown — a combination most lenders won’t offer. This is particularly powerful for California business owners, consultants, and freelancers who carry irregular income and want to lower their initial payment while their business grows.
DiVita Home Finance has lender relationships that allow us to layer a 3-1 buydown on top of bank statement qualification. Ask us about current availability.
Who Pays for the Buydown?
In most California purchase transactions today, the seller pays for the buydown as a concession. Instead of reducing the price, the seller deposits funds into escrow to buy down your rate. This benefits both sides: the seller maintains the sales price (important for appraisals and comps), and the buyer gets meaningful payment relief.
Buydowns can also be funded by:
- Builders — new construction projects frequently offer buydowns as incentives
- Lenders — a lender-paid buydown is built into the rate/cost structure
- Buyers — you can pay for the buydown yourself if the seller won’t contribute
Buydown vs. Permanent Rate Reduction
A temporary buydown is not the same as buying discount points. Points permanently reduce your rate for the life of the loan. A buydown gives you a lower rate for the first 1–3 years, with the expectation that you refinance before the full rate kicks in.
In a market where rates are expected to decline, a buydown often delivers more value than spending the same money on permanent points — because you capture the lower initial payments AND refinance into a better rate before Year 4.
Is a Buydown Right for You?
A 3-1 buydown makes the most sense when:
- You believe mortgage rates will be lower in 2–3 years
- A seller is willing to contribute closing cost concessions
- You want the lowest possible payment in the early years of homeownership
- You’re buying a jumbo or bank statement loan and most lenders won’t offer this flexibility
Frequently Asked Questions
What is a 3-1 buydown mortgage?
A 3-1 buydown temporarily reduces your interest rate by 3% in Year 1, 2% in Year 2, and 1% in Year 3 before returning to the permanent note rate in Year 4. It’s funded by an upfront deposit — usually paid by the seller — held in escrow.
Can you do a buydown on a jumbo loan?
Most lenders restrict buydowns to conforming loan amounts. DiVita Home Finance can structure 3-1 and 2-1 buydowns on jumbo loans throughout California, including for luxury properties in the Bay Area, Marin County, Napa, and Southern California.
Can a self-employed borrower use a buydown?
Yes. DiVita Home Finance can combine a 3-1 buydown with a bank statement loan, which qualifies self-employed borrowers using 12–24 months of bank statements instead of tax returns. Most lenders won’t offer this combination.
What happens if I don’t refinance before Year 4?
Your payment adjusts to the full note rate in Year 4. There’s no penalty or risk — the loan simply returns to the rate you originally agreed to. The buydown funds in escrow were already used to subsidize your reduced payments in Years 1–3.
Is the 3-1 buydown better than a 2-1 buydown?
The 3-1 buydown provides a larger rate reduction in Year 1 (3% vs. 2%) and a third year of reduced payments (1% below note rate in Year 3). It costs more to fund but delivers greater payment relief and more time to refinance. For higher loan amounts, the additional monthly savings often justify the higher upfront cost.
📞 Call DiVita Home Finance at (800) 239-1103 to discuss buydown options for your California purchase — including jumbo and bank statement loan structures.
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About DiVita Home Finance
DiVita Home Finance is a small, family-owned mortgage company based in Marin County, California. When you call, you speak directly with Michael DiVita — the owner — not a call center, not an out-of-state rep, not someone reading from a script. We’re here for a low-key, no-obligation conversation about your situation.
We take your privacy seriously. We will never sell your information to third-party lenders or lead generation companies — unlike many of the large mortgage platforms. Your inquiry stays with us, period.
📞 Call: (800) 239-1103 | 💬 Text Michael directly: (310) 849-9124
🔗 Related Programs
DiVita Home Finance offers several advanced buydown structures that most lenders won’t do — especially on jumbo loans:
- 3/2/1 Jumbo Buydown California — Cut your rate 3% in year one on a $1.5M–$3M+ loan. Most lenders refuse; we have the portfolio investors who allow it.
- Interest-Only Buydown California — Layer an IO period on top of a 3/2/1 buydown for the lowest possible payment in years 1–3. $2M loan: as low as $6,250/month in year one.
Available on Fannie Mae, FHA, and jumbo portfolio loans. 📞 Call (800) 239-1103 to run the numbers on your scenario.
