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Short answer
Discount points are a one-time fee paid at closing that lowers your interest rate for the life of the loan, while a temporary buydown uses money set aside at closing to lower your payment for only the first one to three years before it rises to the full note rate. Points can make sense if you plan to keep the loan a long time; a temporary buydown eases the first years and is often paid by a seller or builder, but you qualify at the full rate. Ask lenders to price both for the same loan so you can compare total cost over the time you expect to keep it.
| Feature | Discount points | Temporary buydown |
|---|---|---|
| What it changes | Your note rate, for the life of the loan | Your payment in the first 1 to 3 years only |
| How long it lasts | Until you sell, refinance, or pay off the loan | Ends after the buydown period; payment rises to the full note rate |
| Who usually pays | Usually you, at closing (a seller credit can sometimes cover it) | Often a seller or builder, or you |
| How you qualify | At the lower rate you bought | At the full note rate |
| Cost | One point = 1% of the loan amount | The total payment difference over the buydown period |
| Typical fit | Keeping the loan a long time | Easing the first years, especially with seller-paid funds |
| Program limits | Lender pricing | Fannie Mae: up to 3% below note rate, 1% per year steps, up to 3 years |
According to the CFPB, points lower your interest rate in exchange for paying more at closing. One point equals one percent of the loan amount, and points do not have to be round numbers. Because the lower rate lasts for the life of the loan, the CFPB notes that points can be a good choice if you plan to keep your loan for a long time.
The trade-off is time. If you sell or refinance before your monthly savings add up to what you paid, the points cost more than they returned. The CFPB suggests asking a loan officer to show you two options, with and without points, and to calculate the total cost over a few possible timeframes.
A temporary buydown lowers your payment for the first years of the loan. Money is deposited at closing into an account that covers the difference between the reduced payment and the full payment. Common versions are a 1-0 (one year lower), 2-1 (two years), and 3-2-1 (three years).
Fannie Mae's rules for conventional loans:
When a seller, builder, or other interested party pays for the buydown, it counts toward Fannie Mae's interested-party contribution limits (3% to 9% on a primary home depending on loan-to-value). For FHA loans, HUD does not permit temporary buydowns on refinances or on ARMs, and the lender must escrow the buydown funds.
Our temporary buydown calculator shows 1-0, 2-1, and 3-2-1 payment schedules, and the calculators page has the rest of our tools.
Discount points are often worth a close look if:
A temporary buydown is often worth a close look if:
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Points lower your interest rate for the life of the loan in exchange for paying more at closing. A temporary buydown lowers your payment for only the first one to three years, then the payment rises to the full note rate.
The CFPB explains that one point equals one percent of the loan amount. Points do not have to be round numbers.
No. Under Fannie Mae's rules, the lender must qualify you at the note rate, not the bought-down rate.
Yes, within limits. When a seller, builder, or other interested party pays for a buydown on a conventional loan, it counts toward Fannie Mae's interested-party contribution limits.
Under Fannie Mae's rules, up to three years, with the rate rising no more than 1% per year. A 2-1 buydown, for example, lasts two years.
HUD Handbook 4000.1 does not permit temporary buydowns on FHA refinances or ARMs, and the funds must be escrowed. Ask your lender how the rules apply to a purchase.
This page is general education, not a loan offer, commitment, or approval. Program rules and figures change; the figures here were checked against the sources below in October 2026. Your options depend on your credit, income, property, and each lender's guidelines. All loans are subject to approval.
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This page explains the rules. For your situation, compare options yourself or talk with a licensed loan officer.