As home prices and interest rates continue to challenge buyers in the Coachella Valley, creative financing strategies are becoming essential. One increasingly popular option is the 3-2-1 buydown—a temporary interest rate reduction that can make your mortgage more affordable in the critical early years. But how does it really work, and is it right for you?
In this guide from MortgageWorks, your trusted mortgage advisor in Coachella Valley, we’ll unpack the 3-2-1 buydown with real-world insights, expert analysis, and local relevance.
A 3-2-1 buydown is a mortgage financing strategy that reduces your interest rate by:
3% in Year 1
2% in Year 2
1% in Year 3
After Year 3, the rate adjusts to the full note rate for the remainder of the loan term.
Example:
If your fixed mortgage rate is 7% on a 30-year loan:
Year 1: 4%
Year 2: 5%
Year 3: 6%
Year 4–30: 7%
The buydown is typically funded upfront—often by the seller, builder, or even lender incentives—to ease the buyer’s payment burden.
The Coachella Valley real estate market is known for its seasonal swings, luxury properties, and competitive pricing. With interest rates hovering near historic highs in 2024–2025, local buyers are turning to 3-2-1 buydowns as a buffer.
A couple in Palm Desert purchased a $600,000 home with a 20% down payment. Their lender offered a 3-2-1 buydown funded by the seller, saving them over $14,000 in payments in the first three years.
“It gave us breathing room to settle in and make renovations without stretching our budget,” said homeowner Jessica R., via a MortgageWorks client survey.
The temporary rate reduction is prepaid through a lump sum escrowed at closing. This sum covers the difference between the note rate and the reduced payments for the first three years.
Sellers: In a buyer’s market, they offer buydowns as incentives.
Builders: Often use buydowns to move new construction inventory.
Lenders: Sometimes include it in promotional loan programs.
Lower upfront payments = financial flexibility
Easier qualification due to lower debt-to-income (DTI) in early years
Bridge to future refinancing if rates drop
Higher monthly payments begin in Year 4
Requires upfront funding (not all sellers or builders offer this)
Not ideal for short-term homeowners
No. A 3-2-1 buydown is temporary, while a permanent buydown (also known as buying points) lowers your rate for the life of the loan.
Yes—if market conditions improve, refinancing is an option before the rate reaches its full amount.
The cost depends on the loan amount and the spread between the reduced and full rate. It’s typically 1–3% of the loan amount.
Experts at MortgageWorks advise clients to invest the early savings wisely—whether into:
Emergency funds
Home improvements
Paying down other debt
“A 3-2-1 buydown isn't just about lower payments—it's about using that window of savings to build long-term stability,” says Art Alvarez, Broker/Owner of MortgageWorks.
A 3-2-1 buydown can be a powerful tool if:
You’re buying your forever home
You expect your income to increase
You’re purchasing from a seller or builder offering incentives
It may not be ideal if:
You plan to sell in a few years
You can’t afford the full mortgage once the rate resets
Ask your lender or agent about 3-2-1 buydown opportunities.
Negotiate with sellers or builders to fund the buydown.
Run the numbers with your mortgage advisor—short-term savings must justify the upfront cost.
At MortgageWorks, we help clients navigate complex mortgage strategies with clarity, transparency, and deep market expertise. If you're considering a 3-2-1 buydown, we’ll help you decide if it’s the right fit—and negotiate the best terms possible.
Contact us today to speak with a local expert and explore your best mortgage options. 760-969-5023
We've been helping customers afford the home of their dreams for many years and we love what we do.
Company NMLS: 337037
www.nmlsconsumeraccess.org
777 E. Tahquitz Canyon Way, Suite 200-47
Palm Springs, CA 92262
Phone: 760-969-5023
Fax: 760-969-5024
art@mwloan.com
Powered By LenderHomePage.com