There's real truth in what your lender told you, though the mechanics are worth getting exactly right. Federal rules (the QM and HOEPA points-and-fees tests under Reg Z) cap the total points and fees on a loan. Discount points count toward that cap, with one carve-out: up to one to two "bona fide" discount points, meaning points that genuinely reduce your rate in line with established industry pricing, can be excluded from the test. Points that don't meet the bona fide definition are still permitted, they just count against the cap. The practical effect matches what you were told. A deep buydown means a lot of points, most of which count toward the points-and-fees limit, so at some depth the loan fails the test. A rate sheet might technically show a very low rate for a large number of points, but the lender can't deliver that structure in compliance. On top of the federal limits, a down payment assistance program can impose its own restrictions on rate buydowns as a condition of the program. When a DPA borrower hears "we can't buy the rate down further," the constraint is often the DPA program's own guidelines rather than the lender doing anything wrong. Ask your lender to name the specific constraint, the points-and-fees cap or a DPA rule, so you can confirm it's being applied correctly. And for what it's worth, we lean against deep buydowns anyway. That cash usually works harder covering closing costs or staying in your reserves.