source:
  type: guide
  id: fhlmc-4204.3
  authority: Freddie Mac Single-Family Seller/Servicer Guide Section 4204.3 — Temporary
    subsidy buydown plans
  description: Freddie Mac Single-Family Seller/Servicer Guide Section 4204.3 — Temporary
    subsidy buydown plans.
  coverage_tier: operative
obligations:
- id: fhlmc-4204.3-full
  canonical_id: fhlmc-4204.3-full
  section: Freddie Mac Single-Family Seller/Servicer Guide Section 4204.3 — Temporary
    subsidy buydown plans
  type: do
  tags:
  - regulator-direct
  - fhlmc
  - freddie-guide
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: Freddie Mac Single-Family Seller/Servicer Guide Section 4204.3 — Temporary
      subsidy buydown plans
    source_class: fhlmc-guide
    source_url: https://guide.freddiemac.com/ci-guide
    snapshot_id: 5869ee9e606cd4ae
    fetched_at: '2026-05-23T00:27:40Z'
    content_hash: sha256:9a1b23e5024bb369e7a59d36b3702383c11ace68b5d209fdef791bc8f955c637
    paragraph_quote: '4204.3: Temporary subsidy buydown plans (04/12/26) This section
      contains information related to: ■ Eligible buydown plans ■ Ineligible Mortgages
      ■ Special underwriting requirements for Mortgages with buydown plans ■ Special
      documentation requirements for Mortgages with buydown plans ■ Other requirements
      for Mortgages with buydown plans ■ Delivery requirements for Mortgages with
      buydown plans (a) Eligible buydown plans Temporary subsidy buydown plans (“buydown
      plans”) allow the Borrower to benefit from a temporary subsidy of the monthly
      payment of principal and interest. Freddie Mac will purchase Limited Buydown
      Mortgages and Extended Buydown Mortgages pursuant to the terms of the Purchase
      Documents and this section. For a Limited Buydown Mortgage, the initial interest
      rate must be: ■ Temporarily reduced to no more than two percentage points below
      the Note Rate, and ■ Increased by no more than one percentage point annually
      for no more than two years from the first scheduled payment date For an Extended
      Buydown Mortgage, the initial interest rate must be: ■ Temporarily reduced by
      more than two percentage points, but no more than three percentage points, below
      the Note Rate, and ■ Increased by no more than one percentage point annually
      for more than two years, but no more than three years, from the first scheduled
      payment date Home Possible® Mortgages and HeritageOne® Mortgages with buydown
      plans must meet the requirements of this section and Sections 4501.2 and 4504.5,
      respectively. (b) Ineligible Mortgages The following Mortgages are not eligible
      for buydown plans: Freddie Mac Single-Family Seller/Servicer Guide Chapter 4204
      As of 04/12/26 Page 4204-10 ■ 3/6 Month ARMs ■ 5/6-Month ARMs secured by a 3-to
      4-unit Primary Residence ■ Cash-out refinance Mortgages ■ “No cash-out” refinance
      Mortgages with a buydown plan funded with a lender credit derived from an increase
      in the interest rate ■ Investment Property Mortgages For any Mortgage with a
      buydown plan, the initial interest rate may not be more than three percentage
      points below the Note Rate. The buydown plan may not extend for more than three
      years after the first scheduled payment date. (c) Special underwriting requirements
      for Mortgages with buydown plans (i) Establishing housing and debt payment-to-income
      ratios For fixed-rate Mortgages, the Seller must qualify the Borrower using
      monthly payments calculated at the Note Rate; however, the interest rate used
      to qualify the Borrower must be equal to or greater than the maximum interest
      rate that may apply during the first five years after the date on which the
      first regular periodic payment will be due, based on the loan amount over the
      term of the Mortgage. For ARMs, the Seller must qualify the Borrower using monthly
      payments calculated in accordance with Section 4401.2. (ii) Calculation of reserves
      If reserves are required, the reserves must be calculated using the Note Rate.
      Freddie Mac Single-Family Seller/Servicer Guide Chapter 4204 As of 04/12/26
      Page 4204-11 (d) Special documentation requirements for Mortgages with buydown
      plans The Mortgage file must contain: ■ A copy of the executed buydown agreement,
      and ■ The Seller’s calculations of the total cost of the buydown plan, any interested
      party contributions and the annual percentage increase in the Borrower’s monthly
      principal and interest payment during the buydown period. The buydown agreement
      must provide that: ■ The funds in the buydown account will be automatically
      applied each month to reduce the monthly payment of principal and interest;
      ■ If, for any reason, the buydown funds are not available or the buydown funds
      are not paid, the Borrower will remain obligated to make the full monthly Mortgage
      payments required under the terms of the Note; and ■ The Borrower will not assign,
      transfer or close the buydown account, or withdraw buydown funds, except as
      permitted by the terms of the buydown agreement (e) Other requirements for Mortgages
      with buydown plans (i) Custodial Account requirements for buydowns Each buydown
      plan must be fully funded at origination. See Sections 8302.1(a)(ii) and 8302.2(b)
      for Custodial Account requirements for buydown plans. (ii) Note and Security
      Instrument No references to the buydown plan are permitted in the Note and Security
      Instruments. In no event may the buydown agreement change the terms of the Note
      or the Security Instrument. The interest rate and monthly payments shown in
      the Note must be calculated without reference to the buydown plan. (iii) Servicing
      requirements If the Mortgage is foreclosed, the funds in the buydown account
      must be used to reduce the Mortgage debt. If the Mortgage is paid in full, the
      funds must be distributed in accordance with the buydown agreement. If the property
      is sold and the Mortgage is assumed by the purchaser, the funds may continue
      to be used to reduce the Mortgage payments in accordance with the original terms
      of the buydown agreement. Freddie Mac Single-Family Seller/Servicer Guide Chapter
      4204 As of 04/12/26 Page 4204-12 (f) Delivery requirements for Mortgages with
      buydown plans Refer to Section 6302.18 for information on the delivery and pooling
      requirements for Mortgages with a buydown plan.'
  judgment: false
