If you’re buying a home in Richmond, Chesterfield, Henrico, Fredericksburg, or anywhere across Virginia right now, you’ve felt the weight of elevated mortgage rates on your monthly budget. A 1-0 temporary buydown won’t change your long-term rate, but it will lower your first-year payment by a full percentage point — and through June 30, Rate Friendly is covering the cost of that buydown on qualifying purchase loans. That’s a meaningful, documented financial benefit worth understanding clearly before the deadline passes.
This article is educational. It explains exactly what a 1-0 temporary buydown is, how the math works, which loan types are eligible, and how this specific offer compares structurally to what competitors in the Virginia market provide. No pressure, no sales language — just the mechanics, the numbers, and the facts you need to make an informed decision.
The core questions this article answers: What exactly is a 1-0 temporary buydown? How is the buydown fund calculated? Who qualifies? And what makes Rate Friendly’s approach structurally different from retail lenders like Rocket Mortgage, Movement Mortgage, PrimeLending, CapCenter, or Alcova Mortgage? By the time you finish reading, you’ll have a complete picture — including the worked math — to evaluate whether this offer makes sense for your situation.
Article by Duane Buziak, Mortgage Maestro, NMLS #1110647.
The Mechanics of a Temporary Mortgage Buydown — Explained Simply
A temporary buydown is a financing structure in which funds are deposited into a subsidized escrow account at closing to reduce the borrower’s effective monthly payment during a defined period. The critical detail: the note rate does not change. The loan is originated at the full interest rate. Only the payment calculation during the buydown period is reduced, with the escrow account covering the difference each month.
A 1-0 buydown works like this: in year one, your payment is calculated as if your rate were 1 percentage point lower than your actual note rate. Starting in month 13, your payment reverts to the full note rate for the remainder of the 30-year term. That’s it. One year of relief, then the standard payment schedule for the life of the loan.
It’s worth distinguishing this from two commonly confused alternatives:
Permanent discount points: You pay money upfront at closing to permanently reduce your interest rate for the entire loan term. The rate change is real and lasting, but the upfront cost is higher and the breakeven timeline is longer.
2-1 buydown: Similar structure to a 1-0, but the rate is reduced by 2 percentage points in year one and 1 percentage point in year two before reverting to the full note rate in year three. The buydown fund deposit required is larger because you’re subsidizing two years of payment differences instead of one.
The 1-0 buydown is the most cost-efficient temporary structure for borrowers who want near-term payment relief with a smaller escrow deposit requirement. Understanding current mortgage rate strategies in Virginia can help you determine whether a buydown or another approach fits your financial profile best.
How the buydown fund is calculated: At closing, the party paying for the buydown (more on that in a moment) deposits a lump sum into an escrow account. That deposit equals the total difference between the full note-rate payment and the reduced year-one payment, multiplied by 12 months. Each month during year one, the servicer draws from that escrow account to make up the difference between what the borrower pays and what the full payment would be. When year one ends, the escrow account is drawn to zero and the borrower begins paying the full note-rate payment directly.
Who typically pays for a buydown? Buydowns are most commonly funded by sellers as a concession in purchase transactions — a seller might offer to cover the buydown cost instead of reducing the purchase price. Builders frequently use lender-paid or builder-paid buydowns as sales incentives. Lenders can also fund buydowns as a pricing concession.
The educational distinction worth understanding here: when Rate Friendly covers the cost of the buydown through June 30, the deposit into that escrow account comes from the lender side of the transaction. You, as the borrower, receive the year-one payment reduction without contributing the buydown fund from your own pocket or negotiating it into your purchase price. That’s a structural benefit with a real dollar value — and the math in the next section shows exactly what that value is. Per Fannie Mae Selling Guide B2-1.4-04, temporary buydowns on fixed-rate purchase transactions are permitted for principal residences and second homes. (Source: fanniemae.com/content/guide)
The Breakeven Math: Exactly What You Save in Year One
Numbers make this real. The following examples use the standard P&I payment formula: M = P[r(1+r)^n] / [(1+r)^n – 1], where P is the loan principal, r is the monthly interest rate (annual rate divided by 12), and n is the number of payments (360 for a 30-year loan). All rates below are illustrative and hypothetical — actual rates vary daily based on creditworthiness, LTV, loan type, and market conditions.
Worked Example 1: $350,000 Loan at 7.00% Note Rate
Full P&I payment at 7.00% note rate: Using the formula with P = $350,000, r = 0.07/12 = 0.005833, n = 360: M = $2,328.56 per month.
Year-one buydown payment at 6.00%: Using r = 0.06/12 = 0.005000: M = $2,098.43 per month.
Monthly savings in year one: $2,328.56 – $2,098.43 = $230.13 per month.
Total year-one savings: $230.13 × 12 = $2,761.56.
Buydown fund deposit required: $2,761.56 — this is the lump sum that must be deposited into escrow at closing to fund the 12-month subsidy. When Rate Friendly covers this cost, that $2,761.56 comes from the lender, not from you.
Worked Example 2: $500,000 Loan at 7.25% Note Rate
This loan size is relevant to buyers in Henrico County, Short Pump, Glen Allen, and other price tiers in the Richmond metro where median values have trended into the upper $300,000s to mid-$400,000s range in recent years, with many buyers financing above $400,000. Buyers in these price ranges may also want to review strategies to compare mortgage rates across lenders to ensure they’re capturing the most competitive pricing available.
Full P&I payment at 7.25% note rate: r = 0.0725/12 = 0.006042: M = $3,413.91 per month.
Year-one buydown payment at 6.25%: r = 0.0625/12 = 0.005208: M = $3,078.59 per month.
Monthly savings in year one: $3,413.91 – $3,078.59 = $335.32 per month.
Total year-one savings: $335.32 × 12 = $4,023.84.
Buydown fund deposit required: $4,023.84 — covered by Rate Friendly through June 30 on qualifying loans.
Savings scale with loan size. The larger your loan, the more meaningful the year-one payment reduction becomes.
Buydown Savings Reference Table
All rates are illustrative. Actual rates vary. See disclaimer below.
Loan Amount: $250,000 | Note Rate: 7.00% | Year-One Rate: 6.00% | Full P&I: $1,663.26 | Buydown Payment: $1,498.88 | Monthly Savings: $164.38 | Annual Savings / Buydown Fund: $1,972.56
Loan Amount: $350,000 | Note Rate: 7.00% | Year-One Rate: 6.00% | Full P&I: $2,328.56 | Buydown Payment: $2,098.43 | Monthly Savings: $230.13 | Annual Savings / Buydown Fund: $2,761.56
Loan Amount: $500,000 | Note Rate: 7.25% | Year-One Rate: 6.25% | Full P&I: $3,413.91 | Buydown Payment: $3,078.59 | Monthly Savings: $335.32 | Annual Savings / Buydown Fund: $4,023.84
Loan Amount: $650,000 | Note Rate: 7.25% | Year-One Rate: 6.25% | Full P&I: $4,438.08 | Buydown Payment: $4,002.17 | Monthly Savings: $435.91 | Annual Savings / Buydown Fund: $5,230.92
Note: $650,000 falls within the 2026 conforming loan limit of $806,500 for single-family properties in most Virginia counties. (Source: FHFA — verify current limits at fhfa.gov/data/conforming-loan-limit-values.)
Who Qualifies and Which Loan Types Are Eligible
Temporary buydowns are permitted across multiple loan programs, but the rules differ by agency. Here’s what you need to know about eligibility before assuming this offer applies to your transaction.
Loan Type Eligibility
Conventional (Fannie Mae / Freddie Mac Conforming): Temporary buydowns are permitted on fixed-rate purchase transactions for principal residences and second homes up to the 2026 conforming loan limit of $806,500. Investment properties are generally not eligible under current agency guidelines. Seller contribution limits apply based on LTV: typically 3% of purchase price at LTV above 90%, 6% between 75-90% LTV, and 9% at 75% LTV or below. Verify current guidelines at fanniemae.com/content/guide.
FHA: Temporary buydowns are permitted per HUD Handbook 4000.1. Seller concession limits apply (currently 6% of the sales price). The buydown must be structured to meet HUD requirements. Buyers considering this path should also review FHA loan requirements in Virginia to understand the full qualification picture. Reference: hud.gov.
VA: Temporary buydowns are permitted per the VA Lenders Handbook, Chapter 8. VA seller concession rules are more flexible — sellers can contribute up to 4% of the established reasonable value for certain concessions. Virginia veterans should explore the full range of VA loan benefits available before deciding on a rate strategy. Reference: benefits.va.gov/homeloans/.
USDA Guaranteed: Temporary buydowns are permitted on guaranteed purchase loans subject to Rural Development guidelines. Buyers in eligible rural areas of Virginia should also check USDA loan limits by county to confirm their property qualifies. Reference: rd.usda.gov.
The Qualifying Rate Rule — This Is Critical
Here’s the piece most borrowers don’t hear upfront: a temporary buydown does not change the rate used to qualify you for the loan. Per Fannie Mae guidelines, lenders must qualify borrowers at the full note rate, not the reduced year-one buydown rate. This means your debt-to-income ratio is calculated using the higher, full-rate payment.
Practically speaking, if you qualify at the full note rate, the buydown is a benefit layered on top of a loan you already qualify for. It reduces your actual payment in year one without changing your eligibility. If you were counting on the reduced payment to qualify, that’s not how the math works under agency guidelines — and any lender who implies otherwise is not giving you accurate information.
Transaction and Property Eligibility
Temporary buydowns apply to purchase transactions. Rate/term refinances and cash-out refinances generally do not qualify for temporary buydown structures under standard agency guidelines — confirm with your loan officer for any program-specific exceptions.
Primary residences are eligible across all loan types. Second homes are eligible under conventional guidelines. Investment properties are generally excluded from agency-backed temporary buydown programs.
Rate Friendly’s offer applies to qualifying purchase transactions in Virginia (Richmond metro including Short Pump, Glen Allen, Henrico, Chesterfield, Midlothian, Hanover, Ashland, Goochland, Louisa, Caroline County; the Fredericksburg corridor including Spotsylvania, Stafford, Prince William; Hampton Roads including Virginia Beach, Chesapeake, Newport News, Suffolk, Williamsburg, Yorktown; and central Virginia including Charlottesville, Albemarle, Roanoke, and Lynchburg), as well as Florida, Tennessee, and Georgia.
How Rate Friendly Differs From What Competitors Provide
Let’s be direct about this comparison. The lenders listed below are all active in the Virginia market, many are well-regarded, and each has strengths. The goal here isn’t to diminish any of them — it’s to explain structural differences that are factual and documentable, so you can make an informed choice.
Head-to-Head Comparison: Key Structural Differences
Rate Friendly (Duane Buziak, NMLS #1110647): Lender-paid 1-0 buydown available through June 30 on qualifying purchases | NoTouch Credit pre-qualification using Vantage Score 4.0 — no hard credit pull | Shops hundreds of wholesale lenders | Broker model with access to multiple wholesale pricing channels.
Rocket Mortgage: Single-lender retail model | Hard credit inquiry typically required for rate quote | No documented lender-paid 1-0 buydown offer with a defined expiration date | Rate pricing limited to Rocket’s own product menu.
Movement Mortgage: Retail direct lender | Hard inquiry standard for pre-approval | Known for fast processing; single-lender pricing | No documented equivalent lender-paid buydown offer at time of writing.
PrimeLending: Retail direct lender with a broad product menu | Hard inquiry standard | No documented soft-pull pre-qualification equivalent | Single-lender pricing model.
CapCenter: Virginia-based lender with a fee-focused model | Hard inquiry standard for pre-approval | No documented lender-paid buydown offer with June 30 deadline | Single-lender pricing.
Alcova Mortgage: Virginia-based retail lender | Hard inquiry standard | No documented equivalent lender-paid buydown offer | Single-lender pricing model.
Atlantic Bay Mortgage: Southeast regional retail lender | Hard inquiry standard | No documented equivalent lender-paid buydown offer | Single-lender pricing model.
Note: Competitor information reflects publicly available information at time of writing. Lender programs change frequently. Always verify directly with any lender.
The NoTouch Credit Distinction
This is a structural difference, not a marketing phrase. When most lenders run a pre-approval, they submit a hard credit inquiry. Hard inquiries appear on your credit report and can affect your score. Multiple hard inquiries in a short window — from shopping multiple lenders — can compound that impact.
Rate Friendly’s NoTouch Credit process uses Vantage Score 4.0 for initial pre-qualification without a hard inquiry. You can explore rate options, see what you qualify for, and understand your buying power without any credit score impact at the pre-qualification stage. Borrowers who want to understand how this works in practice should read about the no credit check mortgage process for Virginia homebuyers. Per the CFPB, soft inquiries do not affect credit scores; hard inquiries do. (Source: consumerfinance.gov)
Broker vs. Direct Lender: What It Means for Your Rate
A retail direct lender — Rocket, Movement, PrimeLending, CapCenter, Alcova, Atlantic Bay — offers pricing from their own product menu only. They are the lender. A mortgage broker shops your loan to hundreds of wholesale lenders and presents the most competitive pricing available across that network.
Neither model is inherently superior for every borrower in every situation. But the broker model means more pricing options, and the June 30 deadline on this specific lender-paid buydown creates a real, time-bound decision window that doesn’t exist with a retail direct lender’s standard product menu. Buyers who want to see how wholesale pricing compares should explore strategies to secure the lowest mortgage rates in Virginia before making a final lender decision.
Temporary Buydown vs. Permanent Points vs. Waiting to Refinance
Before committing to any rate strategy, it’s worth comparing the three main options side by side. Each serves a different borrower profile and rate outlook.
Three-Way Comparison
1-0 Temporary Buydown (Lender-Paid through June 30): Upfront cost to borrower: $0 (covered by Rate Friendly) | Year-one monthly savings: Approximately $164-$436/month depending on loan size (see table above) | Year two and beyond: Full note-rate payment resumes | Break-even timeline: Immediate — no borrower cost means no break-even calculation needed | Best fit: Borrowers who want year-one payment relief, expect rates to decline, and may refinance within 2-4 years.
Permanent Discount Points: Upfront cost to borrower: Typically 1 point = 1% of loan amount per 0.25% rate reduction (varies by lender and market) | Year-one savings: Ongoing for life of loan | Year two and beyond: Same reduced rate continues | Break-even timeline: Typically 4-7 years depending on rate reduction achieved | Best fit: Borrowers who plan to stay in the home long-term and won’t refinance before the break-even point.
Float and Refinance Later: Upfront cost to borrower: $0 now, but full closing costs when refinancing | Year-one savings: None — full note-rate payment from month one | Year two and beyond: Depends entirely on where rates are when you refinance | Break-even timeline: Depends on rate improvement and new closing costs | Best fit: Borrowers who believe rates will drop significantly and can absorb the full payment until then.
When the Temporary Buydown Wins
If there’s a reasonable expectation that rates will decline over the next two to four years — making a refinance likely — the temporary buydown is often the most capital-efficient choice. You get year-one payment relief without paying upfront for a permanent rate reduction that may become irrelevant once you refinance. Virginia homeowners who eventually pursue a refinance should understand the refinance rates comparison process to evaluate whether the timing and savings justify the closing costs.
Permanent points make the most sense when you’re confident you’ll hold the loan for at least five to seven years without refinancing. If you refinance before the break-even point on your points, you’ve paid for a rate reduction you didn’t fully use.
The Refinance Nuance Most Borrowers Don’t Know
Here’s something worth understanding: if you refinance during year one of a temporary buydown, the unused balance in the buydown escrow account doesn’t simply disappear. Per Fannie Mae guidelines, remaining buydown escrow funds are applied to the loan balance or returned at payoff. In a refinance scenario, this means the unused subsidy may be applied to reduce your payoff balance or returned to the appropriate party at closing.
This is a nuance most borrowers never hear — and most competitors don’t explain upfront. It means the downside risk of a temporary buydown is limited: if rates drop and you refinance in month eight of year one, you haven’t lost the full buydown fund. The unused portion works in your favor at closing. Confirm the exact treatment with your servicer, as application of funds can vary.
How to Move Before the June 30 Deadline
The offer is real and the timeline is fixed. Here’s the step-by-step process to take advantage of the lender-paid 1-0 buydown before it expires.
Step 1: Start NoTouch Credit Pre-Qualification. Contact Rate Friendly to begin the pre-qualification process using Vantage Score 4.0. No hard credit pull at this stage. You’ll get a clear picture of your buying power and rate range without any score impact. Learn more about how mortgage prequalification works in Virginia and what to expect at each stage of the process.
Step 2: Receive Rate Comparison Across Hundreds of Lenders. As a broker, Rate Friendly shops your loan profile across its wholesale lender network. You see competitive pricing from multiple sources, not a single-lender menu.
Step 3: Confirm Buydown Eligibility. Verify that your loan type (Conventional, FHA, VA, or USDA), purchase price, and property type qualify for the lender-paid 1-0 buydown under the offer terms.
Step 4: Lock Your Rate and Confirm Buydown Documentation. When you lock, confirm that the lender-paid buydown is documented on your Loan Estimate — specifically that the buydown fund deposit appears as a lender credit or closing cost line item. This is your written confirmation of the benefit.
Step 5: Close Before June 30. Rate Friendly’s fastest close times are a structural advantage here. Work with your real estate agent and loan officer to align the timeline. Loans must close before the offer deadline to qualify.
Documents to have ready for pre-approval: Two years of W-2s or tax returns (self-employed borrowers: two years of business and personal returns plus year-to-date P&L) | 30 days of recent pay stubs | Two months of bank and asset statements | Photo ID | Property address if already identified.
Frequently Asked Questions
Q: Does the 1-0 buydown change my long-term interest rate?
A: No. Your note rate is fixed for the life of the loan. The buydown only affects your payment calculation in year one. Starting in month 13, you pay the full note-rate payment.
Q: Will I qualify at the lower buydown rate?
A: No. Per Fannie Mae and agency guidelines, lenders must qualify borrowers at the full note rate, not the reduced year-one rate. Your DTI is calculated on the full payment.
Q: Does the NoTouch Credit pre-qualification affect my credit score?
A: No. The initial pre-qualification uses Vantage Score 4.0 as a soft inquiry. Soft inquiries do not affect credit scores. A hard inquiry will be required later in the formal loan application process, as required by agency guidelines.
Q: What if I refinance during year one?
A: Unused buydown escrow funds are applied to the loan balance or returned at payoff per Fannie Mae guidelines. Confirm the exact treatment with your servicer at time of refinance.
Q: Is this offer available for investment properties?
A: No. Temporary buydowns under agency guidelines are generally limited to primary residences and second homes. Investment properties are not eligible under standard Fannie Mae, FHA, VA, or USDA temporary buydown guidelines.
Q: What states does this offer cover?
A: Virginia, Florida, Tennessee, and Georgia only.
Q: What is the June 30 deadline specifically?
A: The lender-paid buydown offer applies to qualifying loans that close on or before June 30. Contact Duane Buziak directly to confirm current offer terms and any lock requirements.
Q: Can I use this with a VA loan?
A: Yes. Temporary buydowns are permitted under VA loan guidelines per the VA Lenders Handbook, Chapter 8. Confirm eligibility for your specific transaction with your loan officer. Reference: benefits.va.gov/homeloans/.
Putting It All Together: Your Next Step Before June 30
Three things are worth remembering from everything above. First: a 1-0 temporary buydown lowers your first-year P&I payment by one full percentage point with no change to your note rate, no change to your loan term, and no change to your long-term payment obligations. The savings are real, immediate, and fully documented in your Loan Estimate at closing.
Second: through June 30, Rate Friendly is covering the cost of the buydown fund on qualifying purchase loans. That means the $1,972 to $5,230 deposit that would otherwise need to come from a seller concession or your own pocket is funded by the lender. That’s a direct reduction in your out-of-pocket burden at closing.
Third: the NoTouch Credit process means you can explore your options, see real rate comparisons across hundreds of lenders, and understand your buying power — all without a single point of credit score impact at the pre-qualification stage. That’s a structural advantage for any buyer who is still deciding, still comparing, or still working with a real estate agent to find the right home in Richmond, Henrico, Chesterfield, Fredericksburg, Hampton Roads, Charlottesville, or anywhere across Virginia, Florida, Tennessee, or Georgia.
To get a no-obligation rate comparison and confirm your eligibility for the lender-paid buydown before June 30, contact Duane Buziak, Mortgage Maestro, NMLS #1110647, directly through Learn more about our services.