General Mortgage Knowledge · 20% of the SAFE exameasy
Correct answer: Year 1: rate reduced 2% below note rate, Year 2: rate reduced 1% below note rate, Year 3+: full note rate
A 2-1 buydown is temporary: Year 1 rate is 2% BELOW the note rate, Year 2 is 1% BELOW, Year 3+ is the FULL note rate. Example: 7% note rate means 5% (Y1), 6% (Y2), 7% (Y3+). The SELLER or BUILDER typically pays the upfront buydown cost — the difference between the reduced payments and the full payment for each subsidized year. After Year 2, the borrower pays the full note rate permanently.
CRAM ARCADE has the full NMLS question bank, timed practice exams, focus drills on your weakest category, flashcards and spaced repetition. No credit card.
Start studying free