A 3-2-1 buydown lowers your rate by 3% in year one, 2% in year two, and 1% in year three, and the danger sits less in the mechanics than in what the cost signals. Funding a 3-2-1 is a large concession, on the order of several points of the loan, and if a seller or builder stacks a permanent buydown on top, the total giveaway can climb toward roughly 8% of the price. When someone is willing to hand over that much, ask why. - The overpricing flag. If a seller can concede that much and still make their number, the home may be priced high enough that you are overpaying by more than the buydown saves. If you got five bids on a remodel and one contractor offered to throw in far more work for the same price, you would ask what they know that you do not. Jeb would add the fair flip side: heavy concessions can also just mean a motivated seller with margin who wants to move quickly. - No free money. A concession is your own money, financed: a credit given in lieu of a lower price, paid back through a bigger loan and a bigger payment for as long as you own the home. Use it wisely; do not let it talk you into a price you should not pay. - The full payment is the real payment. The discount burns off on schedule, so make sure your budget carries the note-rate payment comfortably. And a permanent buydown is paying points, which we lean against as a default; judge it on break-even like any points decision. Run the numbers on the final payment, never the teaser. Rate and percentage figures here are illustrative.