What is a 1-0 buydown?
A 1-0 buydown lowers your mortgage rate by one full percentage point for the first 12 months of the loan. In month 13 the rate goes to your actual note rate and stays there for the rest of the term. The name is the schedule: 1 point off in year one, 0 off after that.
Nothing about your loan is adjustable. It is a fixed rate mortgage the whole way through. The discount in year one is funded up front by whoever pays for the buydown, parked in an escrow account at closing, and released monthly to cover the gap between the reduced payment and the real one. When that escrow runs out at the end of month 12, the subsidy simply stops.
That escrow detail matters more than it sounds, and I will come back to it. If you sell or refinance during year one, the unused portion of that money does not vanish. It is credited, usually toward your payoff. Nobody pockets it.
Who pays for it is the real question
The mechanics of a 1-0 buydown are the boring part. The part that decides whether it is a good deal is who funds it.
There are four possibilities. The seller pays it out of their proceeds, usually in place of dropping the asking price. A builder pays it as an incentive to move standing inventory. The lender or broker covers it as a credit. Or you pay for it yourself at closing.
Only three of those are interesting. If you are paying for your own buydown out of pocket, you are prepaying your own interest, and you should compare that against every other use of the same cash, starting with a larger down payment. That is a real calculation and sometimes it wins, but it is not the slam dunk the marketing implies.
When somebody else funds it, the analysis changes completely. A seller-funded or builder-funded buydown is money you were never going to see any other way, so the only sensible question is whether you would rather have it as a lower payment in year one or as a lower purchase price. More on that tradeoff below.
You qualify at the full rate, not the discounted one
This is the single most misunderstood thing about temporary buydowns, and it is the reason they are safer than they sound.
Underwriting does not approve you on the reduced year-one payment. It approves you on the note rate payment, the one you will be making from month 13 onward. So the lower first-year payment is not stretching your qualification and it is not a teaser that sets you up to fail. You are already approved for the higher number before the discount is applied.
Practically, that means a 1-0 buydown does not help you buy more house. It cannot. If you are hoping a buydown gets you into a price range you would otherwise miss, that is the wrong tool, and anyone telling you otherwise is describing a product that does not exist.
What it does give you is breathing room in the most expensive year of owning a home, which is exactly when you are buying appliances, fixing what the inspector found, and discovering what your utility bills actually look like.
1-0 buydown vs 2-1 buydown
A 2-1 buydown drops your rate by two percentage points in year one and one point in year two, then goes to the note rate in year three. It is the better known of the two, and it was everywhere in 2023 and 2024.
The obvious difference is size. A 2-1 delivers more relief across a longer stretch, so it also costs meaningfully more to fund. The subtle difference is who it fits. A 2-1 makes the most sense when you have a specific reason to expect your income to rise or your expenses to fall on a two year horizon, or when you genuinely intend to refinance and want cover while you wait. A 1-0 is a lighter product for a shorter problem: the first year.
There is a practical argument for the 1-0 that rarely gets made. Because it costs less to fund, it is far easier to get somebody else to pay for it. A seller who flinches at a 2-1 will often say yes to a 1-0, and a smaller ask is a stronger negotiating position when you also want repairs or a closing cost credit. A buydown you actually get beats a bigger one you argued about and lost.
My honest read: if you are counting on a refinance to make the deal work, be careful with either one. Nobody knows where rates go. Choose a buydown because the year-one payment helps you, not because it buys time for a rate move you are predicting.
1-0 buydown vs paying points for a permanent lower rate
Discount points buy down your rate for the life of the loan. A temporary buydown lowers it for a set number of months. Same cash out the door, completely different shape.
The tradeoff comes down to how long you keep the loan. Points are a long game. You pay up front and recover it slowly through a smaller payment every month for as long as you hold the mortgage, which means there is a break-even point measured in years, and if you sell or refinance before you reach it you lost money. A temporary buydown front-loads all the benefit into the beginning, so there is no break-even to outlive.
So the rough rule is this. If you are confident you will hold this mortgage a long time and you are spending your own money, points usually win on total interest. If you might move or refinance inside a few years, or if somebody else is funding it, the temporary buydown is the better shape.
One caution I would give anyone comparing the two: run it on your actual loan amount rather than on an example. The break-even on points swings a lot with loan size, and a comparison that looks obvious at one price is a coin flip at another. Our <a href="/mortgage-analyzer.html">mortgage analyzer</a> will do this on your real numbers.
1-0 buydown vs a seller credit toward closing costs
This is the comparison that actually comes up at the negotiating table, and it is the one most buyers get wrong.
Say a seller is willing to contribute a fixed amount. You can direct it toward a temporary buydown, toward your closing costs and prepaids, or you can push for a price reduction instead. All three help. They help differently.
A credit toward closing costs reduces the cash you need on closing day, which is the binding constraint for most first-time buyers. A buydown does nothing for your cash to close but lowers your payment for a year. A price reduction lowers your loan amount, your payment, and your property tax basis permanently, but the monthly effect of a modest price cut is smaller than people expect.
So the order of operations I would suggest: if you are short on cash to close, take the closing cost credit, full stop. If you have the cash and your payment is the thing keeping you awake, the buydown does more for you in the first year than an equivalent price cut does. And if you plan to keep this house a long time, the price reduction quietly wins over a long enough horizon. Our post on <a href="/blog/seller-concessions-houston.html">seller concessions in Houston</a> goes deeper on how to ask.
Who a 1-0 buydown actually fits in Houston
A few Houston specifics change the math here, and none of them show up in national articles about buydowns.
First, taxes and insurance are a large share of a Houston payment. A rate buydown only touches principal and interest, so the percentage relief on your full monthly payment, escrow included, is smaller than the rate change alone suggests. In a high tax MUD district or a home with steep windstorm and flood premiums, that gap is wider still. Buyers who compare the rate discount to their all-in payment are often surprised, and I would rather you be surprised now than at closing.
Second, our new construction market is where these show up most. Builders sitting on completed inventory reach for financing incentives before they cut list price, because a visible price cut resets the comps for every home behind it. That is why a temporary buydown is frequently on the table on a finished spec home and almost never on a home that has not broken ground. If you are shopping <a href="/new-construction.html">new construction in Houston</a>, ask what the incentive is on the standing inventory specifically.
Third, if the builder ties the incentive to their in-house lender, compare the whole offer and not the headline. A buydown attached to a higher note rate or heavier fees can easily be worth less than a plain loan somewhere else. The comparison is the entire point, and it is worth doing on paper.
Who should skip it: anyone who needs the money at the closing table instead, anyone whose year-two payment is uncomfortable, and anyone being sold a buydown as a way to afford more house.
How to check it against your own numbers
A buydown is easy to evaluate once you stop comparing it to nothing and start comparing it to the alternatives for the same dollars: a bigger down payment, discount points, a closing cost credit, or a lower price.
Two things worth doing before you decide. Run your real loan amount through the <a href="/mortgage-analyzer.html">mortgage analyzer</a> so you are looking at your payment and not an illustration. Then ask whoever is offering the buydown a plain question: what is the note rate with the buydown, and what is the note rate without it. If those two numbers are not the same, you are not being offered a free buydown. You are paying for it somewhere.
InSync currently covers the cost of a 1-0 buydown for qualifying borrowers, with the terms and the current deadline listed on our <a href="/buydown">buydown page</a>. It is a time-limited offer, so check that page for where it stands rather than trusting a date in an article.
If you would rather just talk it through against a specific house, call or text 713.548.7350. Bring the price and the incentive being offered and we can tell you in a few minutes whether the buydown is the best use of that money or whether you should be asking for something else. Being licensed for both the house and the loan means that is one conversation instead of two.