Thinking about buying in Scottsdale and wondering how to beat today’s mortgage rates? You have smart tools at your fingertips: buydowns, adjustable‑rate mortgages, and rate locks. In a market where prices are high and sellers are more open to concessions, using the right financing strategy can lower your payment and strengthen your offer. This guide breaks down how each option works, what to ask your lender, and how local timelines in Arizona affect your lock strategy. Let’s dive in.
Scottsdale market and timing
Scottsdale is a premium market, with mid‑2025 median sale prices reported in the roughly $760,000 to $880,000 range. Inventory is higher than the 2021–2022 peak, so many sellers are more open to credits or a buydown to help buyers manage payments. That gives you room to negotiate structure, not just price.
Arizona escrows typically close in about 30 to 45 days, with more complex files stretching to 60 days. That timeline guides your rate‑lock choice and whether you need a float‑down or an extension. Plan your lock around appraisal, HOA docs, and lender conditions to avoid last‑minute fees. Typical closing timelines in Arizona can help you set expectations.
What is a buydown?
Temporary buydown basics
A temporary buydown is a prepaid subsidy that lowers your effective mortgage rate for the first one to three years. Common options include a 2‑1 or 3‑2‑1 buydown. The note rate stays the same, but funds are placed in a subsidy account and applied to reduce your early payments. Lenders and investors have specific rules for eligibility and documentation, so confirm details early using Freddie Mac’s guidance on temporary buydown plans.
Permanent buydown (points)
A permanent buydown means you pay discount points at closing to reduce your interest rate for the life of the loan. This can make sense if you expect to hold the mortgage long enough to break even on the upfront cost. The IRS provides rules on how points and seller‑paid points are treated for tax purposes in Publication 936. Talk with a tax professional to understand what applies to you.
When a buydown makes sense in Scottsdale
A seller credit toward a temporary buydown can be a win‑win when a seller wants to keep the list price intact. It gives you lower payments in the early years while the seller maintains pricing. Know the caps on contributions from sellers and other interested parties, which vary by program. FHA generally allows up to 6 percent in interested‑party contributions, which includes buydowns, as outlined in the HUD Handbook summary on Scribd. Conventional loans have tiered limits based on loan‑to‑value, and VA has its own rules. If contributions exceed the cap, they must be handled as a price reduction for loan‑to‑value calculations. Fannie Mae details how lenders treat excess interested‑party contributions.
How ARMs work
ARM structure and caps
With an ARM, you get a lower fixed rate for an initial period, then the rate adjusts on a set schedule. For example, a 5/1 ARM stays fixed for five years and then adjusts annually. After the fixed period, the rate becomes an index plus a margin, and caps limit how much it can change at the first adjustment, at each adjustment, and over the life of the loan. See the Consumer Financial Protection Bureau’s overview of ARM terms and caps in the mortgage terms glossary.
ARM underwriting and fit
Lenders must follow Ability‑to‑Repay and Qualified Mortgage rules. For ARMs, underwriters often test your capacity using the highest rate that could apply in the first five years, which can affect how much you qualify for. Review the CFPB’s ARM underwriting framework in the ATR/QM guidance. An ARM can fit if you expect to sell, refinance, or receive higher income before the first adjustment, and you are comfortable with the capped worst‑case payment.
Rate locks and float‑downs
Lock periods and costs
A rate lock holds your rate and pricing for a set period, commonly 30, 45, or 60 days. Locks protect you from increases but usually do not pass along declines unless you add a float‑down. Get clear on the lock length, fees, and extension policy. For a refresher on lock mechanics, see this overview of a mortgage rate lock. If closing slips, lenders often charge extension fees; ask for the schedule in writing and confirm who pays. Here is a typical view of extension and relock fees.
Float‑down options
Some lenders offer a float‑down that lets you take a lower rate if the market drops by a certain amount during the lock. It usually costs extra and can often be used only once. If you want protection against both increases and big declines, ask upfront about float‑down features and tradeoffs.
Lock strategy for Scottsdale
Because most Arizona escrows close in about 30 to 45 days, a 30 to 60 day lock is common. Coordinate your lock with milestones like appraisal, HOA documents, and final underwriting conditions to minimize extension risk. Use the Arizona closing timeline as a planning guide.
Numbers to compare
- Temporary 2‑1 buydown illustration: Suppose a $600,000 loan has a 7.00 percent note rate. With a 2‑1, Year 1 payments are calculated at roughly 5.00 percent, Year 2 at 6.00 percent, then the full 7.00 percent from Year 3 forward. The upfront buydown cost equals the subsidy needed to cover the difference between the reduced payments and the note‑rate payment for the first two years. Your lender can provide the exact subsidy and a side‑by‑side payment schedule.
- Points break‑even: Ask your lender how much one point reduces the rate, then divide the point cost by the monthly payment savings to estimate months to break even. Use APR to compare offers, and review potential tax treatment in IRS Publication 936.
Offer‑to‑close checklist
- Confirm your loan program and the seller‑credit cap that applies. Review FHA’s guidance on interested‑party contributions in the HUD Handbook summary on Scribd, and ask your lender for the applicable cap on conventional or VA loans.
- Get written scenarios from your lender: fixed‑rate, ARM (with index, margin, and caps), and the same loan with a temporary buydown. Ask for monthly payments for Years 1–5 and all upfront costs.
- Verify investor eligibility for buydowns and how the subsidy will be documented on your Closing Disclosure using Freddie Mac’s buydown plan guidance.
- Decide on a lock strategy: lock length, whether to add a float‑down, and who pays if an extension is needed. Confirm extension fees in writing and review a sample extension fee schedule.
- Ensure seller credits do not exceed program caps. If they do, they must be treated as a price reduction for LTV. See Fannie Mae’s treatment of excess contributions.
Risks to consider
- ARM reset risk: Even with caps, your payment can rise after the fixed period. Review worst‑case scenarios under the ATR/QM framework.
- Program rules: Some investors limit which buydown structures are allowed. Confirm early using Freddie Mac’s buydown plan rules.
- Seller‑credit caps: Contributions above the limit must be handled as a price reduction for LTV. See Fannie Mae on excess contributions.
- Lock timing: Locking too early can lead to costly extensions, while locking too late exposes you to rate jumps. Align your lock with the Arizona escrow timeline.
Buying in Scottsdale should feel both exciting and strategic. If you want to compare buydowns, ARMs, and lock options against real homes and real timelines, let’s talk about a plan that fits your goals and moves you forward with confidence. Reach out to Velma Herzberg for tailored guidance and next steps.
FAQs
What is a 2‑1 buydown on a Scottsdale home loan?
- A 2‑1 buydown uses prepaid funds to lower your effective rate by about 2 percent in Year 1 and 1 percent in Year 2 before your payment returns to the note rate; eligibility and documentation follow investor rules like Freddie Mac’s buydown guidance.
How do Scottsdale seller credits work under FHA, VA, and conventional loans?
- Programs set caps on seller or interested‑party contributions; FHA generally allows up to 6 percent per the HUD Handbook summary on Scribd, while conventional and VA have different limits your lender will confirm.
What does a 5/1 ARM mean for my payment?
- A 5/1 ARM has a fixed rate for five years, then adjusts annually based on an index plus a margin, subject to caps; see the CFPB’s mortgage terms glossary for definitions and examples.
How long should I lock my rate in Arizona?
- Many Scottsdale purchases close in 30 to 45 days, so a 30 to 60 day lock is common; confirm timing with your lender and title team and review potential extension fees if closing slips.
Are mortgage points tax‑deductible for my Scottsdale purchase?
- Points, including some seller‑paid points, may be deductible if IRS rules are met; review IRS Publication 936 and consult a tax professional to confirm your specific eligibility.
