In a buydown loan, who typically pays for the discount points?

In a buydown loan, the seller typically pays for the discount points. This arrangement is made as a way to incentivize buyers by reducing their monthly mortgage payments. By paying points upfront, which represent a percentage of the loan amount, the seller effectively subsidizes the loan costs to make the home more attractive to potential buyers. The upfront cost can be seen as an investment by the seller, ultimately leading to a quicker sale or a higher offered price for the property.

The buyer benefits from lower monthly payments over the life of the loan, which can make homeownership more affordable. In many cases, sellers will offer this incentive in tight or competitive markets to attract offers. While buyers could also choose to pay for these points themselves, it is less common for them to do so in scenarios designed to ease the buyer's financial burden. Thus, the role of the seller in covering discount points is a strategic move to help facilitate the sale and support the buyer's financing needs.