Still Waiting for Rates to Drop? Try a 3-2-1 Buydown Instead

By Gregg Tepper

I have been married to my wonderful wife Letha for 29 years. We have 3 children: Max, Alexander and Charlotte. I have been a licensed Realtor in the New Orleans area for 20 years and am the Operator of The Tepper Group with Keller Williams Realty in Mandeville. Our team services the entire New Orleans and Baton Rouge metro areas. Our team of partners has well over 40 years of experience. In 2024 we helped 132 families buy, sell and lease homes, land and commercial investments.

Most buyers assume they need to wait for interest rates to drop before they purchase a home. In reality, Louisiana buyers already have a way to secure lower payments today. In New Orleans, Mandeville, and Covington, the 3-2-1 buydown has become one of the most effective strategies for entering a home with manageable payments while the broader market continues to adjust.

I want to show you how this actually works so you can see what is possible in today’s market.

Why buyers are still waiting. Rates have been elevated since early 2022, which caused many would-be buyers to pause their plans. However, peak rates were near 8%, and today’s averages have already dropped by almost two percentage points. Many qualified buyers can even get rates under 6%, depending on their credit and debt-to-income ratio. Even with these improvements, people are still on the sidelines waiting for the perfect moment that may not come.

How the 3-2-1 buydown lowers your rate. A 3-2-1 buydown is one of the few tools that can reduce your rate significantly during the first three years of your mortgage. If your market rate is 6.2%, the buydown brings you to 3.2% in year one, 4.2% in year two, and 5.2% in year three. This creates a smooth, predictable payment increase instead of a sudden 6.2% increase. For many buyers, that first year of lower payments makes the transition into homeownership much easier.

How to get the seller to cover the cost. The buydown fee, which often totals around $15,000 on a $350,000 loan, can be covered entirely by the seller. Your agent can write this credit directly into the offer. In today’s market, sellers are more open to concessions, which means you can secure the buydown without paying the cost yourself.

Why this strategy makes sense now. Rates rarely drop all at once. They fall gradually as the Federal Reserve eases borrowing costs. With the Fed chair’s term ending in 2026 and pressure to lower the national interest burden, the long-term trend points toward lower rates. If rates fall into the fives, buyers using a 3-2-1 buydown can refinance early and lock in a permanent lower rate before the temporary buydown expires.

The hidden bonus. If you refinance before the end of the third year, any unused subsidy from the buydown is refunded to you. The bank cannot keep that money once you close a new mortgage. That extra refund is a benefit most buyers never hear about.

Owning a home is more than monthly payments. Homeownership builds stability, community, and long-term financial security. Instead of waiting for unpredictable rate drops, you can use this strategy to buy now with lower payments, refinance later, and begin building equity immediately.

For questions about your options or to start running your own numbers, visit EnvoyMortgage.com or call 985-218-5445.

When you are ready, we’re here to help.