# 3 Ways to Afford a Home When Rates Stay High By David Craig (@davidcraig) · Published 2026-08-26 Canonical: https://voce.com/@davidcraig/ways-afford-home-rates-stay-high-xrepjm --- #### Key Takeaways - The average 30-year fixed mortgage rate sits at 6.65% as of August 2026, and the Fed's higher-for-longer stance means waiting for a rate collapse is risky. - Temporary buydowns (2-1 and 3-2-1) can lower your payment in the first 2–3 years — often funded by the seller or builder at no cost to you. - Permanent buydowns (discount points) reduce your rate for the full loan term; the key is calculating whether you'll recoup the upfront cost before selling or refinancing. - Texas homebuyers have access to state-sponsored programs through TDHCA that pair low-interest mortgages with down payment assistance. The natural reaction is to wait. Wait for the Federal Reserve to cut. Wait for rates to drop back toward 5% or lower. But here is the problem: the Fed has held its policy rate steady at the July meeting, and the bond market — which drives mortgage rates more directly than the Fed does — is keeping the **10-year Treasury yield near 4.70%** ([Affinity Group Mortgage](https://www.affinitygroupmortgage.com/mortgage-rates-this-week-aug-24-2026-6-65-and-what-buyers-should-do-now)). Waiting for a dramatic rate collapse means waiting for factors you cannot control. What you can control is how you structure the loan. As a loan officer in Texas, I work with buyers every week who are closing on homes right now — not because they got lucky with rates, but because they used the right tools to make the payment work. Three strategies stand out: **temporary buydowns**, **permanent buydowns**, and **Texas state-sponsored low-rate programs**. ## What exactly is a temporary buydown? A temporary buydown lowers your interest rate for the first one to three years of the loan. The note rate itself never changes — what changes is the payment you make during those early years. Money set aside in a buydown account covers the difference between your reduced payment and the full payment each month ([FirstBank Mortgage](https://www.fbmortgageloans.com/are-mortgage-buydowns-worth-it)). These are most common when a seller or home builder pays for them as a purchase incentive. On new construction, builders frequently offer buydowns to move finished inventory. On resale homes, a motivated seller can contribute a percentage of the sale price toward your closing costs, and those funds can be used to fund a temporary buydown. There are three standard structures: - **2-1 buydown:** Rate drops 2% in year one and 1% in year two, then settles at the full note rate starting year three. - **3-2-1 buydown:** Rate drops 3% in year one, 2% in year two, and 1% in year three, reaching the full rate in year four. - **1-0 buydown:** Rate drops 1% for the first year only, then returns to the full rate in year two. ### How the math works on a 2-1 buydown On a **$400,000, 30-year fixed loan at 6.5%**, the full principal-and-interest payment is approximately **$2,528**. With a 2-1 buydown, year one uses the payment equivalent of 4.5% — about **$2,027** — saving roughly **$502 per month**. Year two uses a 5.5% equivalent, around **$2,271**, for a monthly saving of about **$257**. The total subsidy needed is roughly **$9,104**, and when a seller or builder covers that, you get two years of lower payments for zero out-of-pocket cost ([Lower.com](https://www.lower.com/mortgages/calculators/temporary-buydown-calculator)). ### Who should consider one Temporary buydowns work best when someone else pays for them. They also make sense if you expect your income to rise in the next few years — the payment steps up as your earnings grow. And if rates eventually drop, you can refinance before the buydown period ends. One critical detail: lenders typically qualify you at the full note-rate payment, not the buydown rate. That protects you from taking on a payment you cannot afford once the subsidy runs out ([Movement Mortgage](https://movement.com/blog/2026/06/temporary-rate-buydowns-explained)). ## How permanent buydowns (discount points) work A permanent buydown — often called **discount points** — lowers your interest rate for the entire life of the loan. One point typically costs **1% of the loan amount** ([PNC](https://www.pnc.com/insights/personal-finance/borrow/what-are-mortgage-points.html)). One point often reduces the rate by roughly **0.25%**, though the exact reduction varies by lender and market conditions ([Bankrate](https://www.bankrate.com/mortgages/mortgage-points)). ### The break-even calculation If you pay **$4,000 in points** to reduce your rate by 0.25% on a $400,000 loan, and that lower rate saves you **roughly $60 per month**, your break-even point is about **67 months**, or 5.6 years. If you plan to stay in the home longer than that, the points pay off. If you sell or refinance before then, you lost money on the deal. Compared to temporary buydowns, permanent buydowns cost more upfront — which is why sellers rarely offer to pay for them. A builder might contribute toward discount points on a slower-selling subdivision, but in most cases, permanent buydowns are a buyer-funded decision. ### When permanent buydowns make sense Permanent buydowns are best for buyers who: - Plan to stay in the home **7 years or longer** - Have **cash available at closing** beyond the down payment - Want the **certainty of a fixed lower rate** without a step-up schedule - Are buying in a price range where the monthly savings meaningfully changes their budget Because you pay for points upfront, the IRS typically treats them as prepaid mortgage interest, which may be tax-deductible if you itemize ([Freedom Mortgage](https://www.freedommortgage.com/learn/homebuying/mortgage-discount-points)). Always confirm with a tax professional, but it is worth understanding how points affect your closing costs before deciding. ## What Texas state programs offer Texas has one of the strongest state-run homebuyer assistance programs in the country. The **Texas Department of Housing and Community Affairs (TDHCA)** offers below-market mortgage rates paired with down payment and closing cost assistance through two main programs: **My First Texas Home** for first-time buyers and **My Choice Texas Home** for repeat buyers ([TDHCA Homebuyer Program](https://welcomehome.tdhca.texas.gov/programs)). ### What the programs provide Feature My First Texas Home My Choice Texas Home Who qualifies First-time buyers (or veterans, targeted areas) Any buyer Rate type 30-year fixed, low-interest 30-year fixed, low-interest Down payment assistance Yes Yes Closing cost assistance Yes Yes Homebuyer education required Yes Yes TDHCA-approved lenders — and CMG Home Loans is on that list ([Participating Lenders](https://welcomehome.tdhca.texas.gov/participating-lenders)) — can originate these loans and combine them with conventional or FHA financing. That means you can stack a TDHCA low-rate mortgage with down payment assistance and still negotiate seller-paid concessions for a temporary buydown. ### Who qualifies Income limits and purchase price caps apply based on your county. Major metro counties like Harris (Houston), Dallas, Tarrant (Fort Worth), Bexar (San Antonio), and Travis (Austin) have higher limits than rural areas to reflect local home prices. Veterans and buyers purchasing in targeted census tracts may qualify for the first-time buyer exception. A homebuyer education course is required, but the state offers it through the Texas Statewide Homebuyer Education Program, and completing it also makes you eligible for additional grant funds in certain counties. ## Putting it all together: stacking the strategies The most powerful approach is not choosing one strategy — it is combining them. Here is how a typical Texas buyer might structure a deal: 1. **Qualify through TDHCA's My First Texas Home** for the below-market base rate and down payment assistance. 2. **Negotiate a seller-paid 2-1 temporary buydown** as part of the offer, funded by the seller's contribution to closing costs. 3. **Use your own cash for the down payment** while the seller covers closing costs, keeping your out-of-pocket low. That combination can produce a first-year effective rate in the **low 4% range** on a conventionally financed 30-year fixed loan, with the full rate still below the national average once the buydown expires. Seller-paid buydowns can reduce the first-year effective rate by as much as 2 full percentage points below the note rate ([LendingTree](https://www.lendingtree.com/home/mortgage/buydown)). ## When these strategies don't work No tool is a magic wand. Temporary buydowns only help if the full note-rate payment fits your budget. TDHCA programs have income limits that price out higher-earning buyers. Permanent buydowns require cash at closing that not every buyer has. And none of these strategies fix the core issue: home prices in Texas have not fallen enough to fully offset higher rates. Across most Texas markets, inventory has increased substantially — reaching over **10 months of supply** statewide as of early 2026 ([ManageCasa](https://managecasa.com/articles/texas-housing-market)) — which gives buyers more negotiating room, but prices remain elevated compared to pre-pandemic levels. The honest answer is that affordability requires both a smart loan structure and a realistic budget. The loan can bridge the gap, but it cannot eliminate it. If you are ready to run the numbers on your specific situation, reach out to a local loan officer who knows Texas programs and buydown structures. The rate environment is not cooperating, but the tools exist to work around it. 6.65%Average 30-year fixed mortgage rate — August 2026[Freddie Mac PMMS](https://www.affinitygroupmortgage.com/mortgage-rates-this-week-aug-24-2026-6-65-and-what-buyers-should-do-now) **Source:** Freddie Mac Primary Mortgage Market Survey, August 24, 2026 **Key Point** Rates spent most of 2024–2026 in the 6%–7% range. Fannie Mae and the MBA both forecast rates to stay in the mid-6% range through the end of 2026. ![Desk with calculator, glasses, charts, and office supplies](https://images.unsplash.com/photo-1761914410572-02614b575847?cs=tinysrgb&fm=jpg&ixid=M3w5Mzk0NDN8MHwxfHNlYXJjaHw0fHxtb2Rlcm4lMjBob21lJTIwa2V5cyUyMGNhbGN1bGF0b3IlMjBmaW5hbmNpYWwlMjBwbGFubmluZyUyMGRlc2t8ZW58MHwwfHx8MTc4Nzc4NDE5OHww&ixlib=rb-4.1.0&q=80&w=1200&h=630&fit=crop&crop=entropy) ?Frequently Asked Questions4 questions 1Does a 2-1 buydown permanently lower my rate? No. A 2-1 buydown reduces your rate by 2% in year one and 1% in year two. So on a 6.65% note rate, the first year payment is based on approximately 4.65%, and the second year on 5.65%. The note rate never changes; an escrow account pays the difference each month. 2Does a temporary buydown help me qualify for a larger loan? The lender qualifies you at the full note-rate payment, not the buydown payment. This protects you from taking on a payment you cannot afford once the subsidy ends. 3Can I use Texas state programs and a buydown together? Yes. With TDHCA-approved lenders like CMG Home Loans, you can combine the state's below-market rate mortgage with down payment assistance and still negotiate seller-paid concessions for a temporary buydown. 4If rates drop next year, did I waste money on a buydown? Not necessarily. If rates drop significantly, you can refinance before the buydown period ends, and the unused escrow funds are typically applied to the loan balance according to your agreement. The buydown itself does not prevent refinancing.