What Is a 2-1 Buydown? Snohomish Seller Options

Is today’s interest rate making you wonder how to attract more buyers without slashing your price? You are not alone. Many Snohomish sellers are weighing a 2-1 buydown as a smart concession that eases a buyer’s first two years of payments while keeping the contract price intact. In this guide, you will learn what a 2-1 buydown is, how the numbers pencil out at common local price points, how it compares to a straight price cut, and the key lender and appraisal rules to confirm before you offer one. Let’s dive in.

2-1 buydown basics

A 2-1 buydown is a temporary financing arrangement that lowers a buyer’s mortgage rate for the first two years. Year 1 is the note rate minus 2 percentage points. Year 2 is the note rate minus 1 percentage point. From year 3 on, the loan returns to the full note rate for the remaining term.

The buydown is funded up front as a lump sum at closing. In a resale, the seller commonly pays this amount as a concession credited toward a buydown or discount points. Lenders hold the funds in a buydown escrow or apply them as prepaid interest, then draw from that pot to make the buyer’s reduced payments possible during the first 24 months.

Why Snohomish sellers use them

A 2-1 buydown can make your listing more attractive without cutting the price. You preserve the contract price, which can help protect neighborhood comparables and your net proceeds, while giving buyers a clear monthly payment benefit right away. In our market that includes Historic Downtown Snohomish and the broader Seattle–Bellevue–Everett area, this tool can help your home stand out to buyers who are payment conscious.

It also gives you a strong marketing message. Rather than reducing the list price, you can advertise meaningful first-year and second-year payment relief to widen your buyer pool. That can be especially useful if your likely buyer plans to refinance or sell within a few years.

How the math works

At a high level, the seller funds the difference between the full monthly principal and interest payment and the reduced payments in years 1 and 2. The total subsidy is the sum of those monthly differences over 24 months. Many lenders simply collect this amount in a lump sum at closing. Some may discount it to present value.

Here is the basic workflow sellers and lenders use:

• Determine the buyer’s loan amount.
• Calculate the full 30-year fixed payment at the note rate.
• Calculate the payments at note rate minus 2% for year 1 and minus 1% for year 2.
• Multiply the monthly differences by 12 for each year and add them together for the total buydown cost.

Snohomish-style example at mid-price

Assume a $700,000 purchase with 20% down, so a $560,000 loan. Use a 30-year fixed note rate of 7.00% for illustration.

• Full payment at 7.00%: about $3,724 per month.
• Year 1 at 5.00%: about $3,007 per month. Savings about $717 monthly.
• Year 2 at 6.00%: about $3,357 per month. Savings about $367 monthly.
• Estimated seller cost: (717 x 12) + (367 x 12) = $13,008 total.
• That is about 2.32% of the $560,000 loan amount.

In many rate environments, total seller cost for a 2-1 buydown often lands in the low single-digit percentage range of the loan amount. The exact number depends on the note rate, term, and lender calculation method.

Buydown vs price reduction

A buydown delivers larger near-term relief. The buyer feels hundreds of dollars in monthly savings during years 1 and 2, which can help them qualify or budget comfortably. After month 24, the payment resets to the full note rate.

A price reduction delivers a smaller monthly benefit, but it lasts for the life of the loan. Using the example above, if you reduced the buyer’s loan amount by the same $13,008 instead of funding a buydown, their monthly principal and interest payment at 7% would drop by roughly $80 to $100 for the entire 30-year term. Over time, the cumulative savings can exceed your one-time credit.

Which is better depends on the buyer’s plans. If a buyer expects to hold the loan long term, a permanent price reduction is usually superior. If a buyer plans to refinance or sell within a couple of years, the temporary buydown can be more attractive and can make your listing more compelling.

Program rules and limits to check

Lenders and loan programs treat buydowns differently, so early coordination matters.

• Qualification method. Some lenders qualify buyers at the reduced buydown payment if funds are verified, while others require qualification at the full note rate. This varies by investor and product. Confirm in writing how your buyer’s lender will underwrite the loan.
• Seller concession caps. Conventional conforming loans cap seller-paid costs based on the down payment tier. FHA has historically allowed up to 6% for certain closing costs and prepaid items. VA and USDA have their own rules. Ask the lender whether a temporary buydown counts toward these caps or is treated as discount points on a separate line.
• Appraisal and comps. Keeping the contract price higher while offering a buydown can help preserve comparable sale data, but appraisers consider concessions. Unusually large concessions can draw extra scrutiny or adjustments. Your listing strategy should anticipate this.
• Disclosure and closing. The buydown payment should appear on the Closing Disclosure as a seller credit or a buydown escrow item, with clear documentation that shows how the amount was calculated and how the funds will be applied.

Seller checklist for Snohomish

Use this practical list before you advertise or accept an offer with a 2-1 buydown:

• Ask the buyer’s lender in writing:
  • Will the borrower qualify at the reduced payment? What documentation is required for the buydown funds?
  • How will the buydown appear on the Closing Disclosure? Will it count toward seller concession caps for the selected program?
  • Does the investor accept seller-funded temporary buydowns for this specific loan product?
• Compare your net. Model your net proceeds if you pay the buydown versus reducing price by the same dollar amount. Discuss tax considerations with your CPA.
• Confirm MLS and contract language. Your brokerage may have standard addenda describing the buydown, who funds it, and the calculation method.
• Coordinate escrow instructions early. Title or escrow will need a written calculation and clear funding instructions to avoid delays.

When a 2-1 buydown makes sense

• You want to keep the sale price intact to support neighborhood comps while offering a buyer-friendly concession.
• You are targeting buyers who need lower initial payments or plan to refinance in the near term.
• Your property is well prepared and marketed, and a targeted concession can push fence-sitters to act.

If your likely buyer base favors long-term ownership at the current rate, consider offering a smaller price reduction instead. It creates a permanent payment benefit and can be more persuasive to that audience.

Common pitfalls to avoid

• Assuming all lenders qualify at the reduced payment. Many do not. Get the lender’s approach in writing.
• Exceeding seller concession caps. A buydown can be counted toward program limits. Confirm ahead of time.
• Underestimating appraisal treatment. Large or unusual concessions can affect how the appraiser analyzes the contract.
• Waiting to plan. The buydown amount, documentation, and escrow instructions should be nailed down before the Closing Disclosure is drafted.

Work with a local strategy

In Snohomish County, results hinge on preparation and precision. A well-staged, well-priced listing paired with the right concession can command attention without undermining your price story. If a 2-1 buydown fits your goals, it can be a powerful tool when negotiated and documented correctly.

Ready to see whether a 2-1 buydown or a strategic price move will best position your sale? Reach out to Kathie Salvadalena for a clear plan, staging-led presentation, and negotiation designed to maximize your net.

FAQs

What is a 2-1 buydown in Snohomish home sales?

• A 2-1 buydown is a temporary rate reduction funded at closing that lowers the buyer’s interest rate by 2% in year 1 and 1% in year 2, then returns to the full note rate.

How much does a 2-1 buydown cost a Snohomish seller around $700,000?

• Using an illustrative $560,000 loan at a 7% note rate, the total buydown cost is about $13,008, which is roughly 2.32% of the loan amount.

Will lenders qualify a buyer at the reduced 2-1 buydown payment?

• Policies vary by lender and loan program; some qualify at the reduced payment if buydown funds are verified, while others require qualification at the full note rate.

Is a seller-funded 2-1 buydown better than a price reduction?

• It depends on the buyer’s plans; a buydown provides larger short-term relief, while a price reduction creates a smaller but permanent monthly savings for the life of the loan.

Do 2-1 buydowns affect appraisals and comps in Snohomish?

• Appraisers consider concessions, and large or unusual concessions can receive extra scrutiny or adjustments, even if the contract price remains higher.

How is a 2-1 buydown shown on closing documents?

• The buydown typically appears on the Closing Disclosure as a seller credit or a buydown escrow line item, with documentation of how the amount was calculated and applied.

Do 2-1 buydown funds count toward seller concession caps?

• Often yes, though treatment varies by lender and program; confirm whether the buydown counts toward limits for conventional, FHA, VA, or other loans.