Rate Locks, Points and Buydowns: What to Pay For

Points are worth buying only if you will hold the loan past the break-even month, and for most San Francisco buyers the lock terms matter more than the points. An SF escrow of 21 to 30 days leaves no room for a 30-day lock to slip, and extension fees on a seven-figure loan run into the thousands.

Discount points vs lender credits: the same decision in two directions

A discount point is 1% of the loan paid at closing in exchange for a lower rate. A lender credit is the reverse: the lender pays part of your closing costs in exchange for a higher rate. The CFPB's framing is the useful one: points trade upfront cost for a lower monthly payment and pay off if you keep the loan a long time; credits lower upfront cost and cost you monthly for as long as you hold it. Points can be fractional (0.375 of a point is fine), and some lenders label fees as "points" that do not lower the rate at all, so always ask what a given charge does to the rate.

Break-even math

On a $1,000,000 30-year loan, one point costs $10,000. If it buys the rate down from 6.5% to 6.25%, the principal and interest payment drops from about $6,321 to $6,157, a saving of $163 a month. Break-even is $10,000 divided by $163, or about 61 months.

Two things decide whether that is a good deal:

• Hold period. If you sell or refinance before month 61 you lose. Buyers of SF condos who expect to trade up in five to seven years are right at the line.
• Refinance odds. If rates fall a half point in the next two years, you will refinance and the points evaporate. If you believe rates are more likely to fall than rise, do not buy points; take a credit instead and refinance later. Refinancing covers what that costs.

Compare the point against the same $10,000 as extra down payment. On the same loan it cuts the payment by about $63 a month forever, with no break-even risk, and it may be the difference between PMI and no PMI or between jumbo and high-balance conforming. Reserves are the third option, and in a bidding war they are often the best one.

Temporary buydowns (2-1, 1-0): who pays, when they help

A 2-1 buydown lowers your effective rate by 2 points in year one and 1 point in year two, then returns to the note rate. The money to cover the difference is deposited into an escrow account at closing. On a $400,000 loan at 6.5%, the reduced payments cost about $9,104 in total subsidy, per one lender's worked example; scale that to an SF loan and a 2-1 on $1.2 million runs around $27,000.

Three honest points about buydowns:

• You qualify at the full rate. Fannie Mae and Freddie Mac require it, so a buydown does not raise your approvable loan.
• Seller-paid buydowns are a concession. Fannie Mae permits them, but the cost counts toward the interested-party contribution cap: 3% of the price above 90% LTV, 6% from 75% to 90%, 9% at 75% or below. In a market where SF single-family homes have routinely sold well over asking, sellers are not offering concessions on competitive listings; they appear on homes that sat, and on new construction where a builder would rather pay a buydown than cut the list price.
• Buyer-paid buydowns are a gimmick. You are prepaying your own payment. The same cash as a permanent point or extra down payment does more.

A buydown is a reasonable bridge if a seller funds it and you expect your income to rise; it is not a reason to buy a home whose year-three payment you cannot carry. Appraisal and underwriting covers how concessions interact with the appraisal.

When to lock: at offer acceptance vs lock-and-shop

Lock at acceptance. The CFPB describes a lock as a commitment that your rate stays the same between the offer and closing, provided you close within the lock period and your application does not change, and notes locks typically run 30, 45 or 60 days. Pick a period at least one to two weeks longer than your contract's escrow. In SF, where fully underwritten buyers routinely close in 21 to 30 days and lenders say roughly 15 to 21 is possible with a fast appraisal (as of 2026-10-25, check current turnaround), a 45-day lock is the safe default and a 30-day lock is a bet on everything going right.

Lock-and-shop programs let you lock before you have a property, usually for a fee or a slightly higher rate, with the lock transferring to the home you buy within a window. They make sense if you are writing offers weekly and rates are rising; ask whether the lock resets if your loan amount changes, because in SF it will.

Lock periods, float-downs and extension fees

Three terms to compare across lenders, in writing:

Who pays when the appraisal or the HOA questionnaire runs late is the question nobody asks until it happens. Appraiser scheduling in SF can take a week or more in busy months, and condo HOAs have no deadline to return a questionnaire. Agree before you lock: lender-caused delays are the lender's cost, and third-party delays are either shared or covered by a lock long enough to absorb them. Experian's guidance is that a lender should waive the extension fee when the delay is its fault; get that promise in the lock confirmation.

Points, credits and your closing cash in a bidding war

In a competitive SF offer, cash is the constraint. A lender credit that raises your rate an eighth of a point but puts $8,000 back into your closing costs can be the money that covers an appraisal gap or keeps your reserves intact. Points do the opposite: they drain the cash that makes your offer safe. If you must choose, choose the offer that closes. You can refinance a rate; you cannot refinance a lost house. Check the comps tool for how far the list price sits from recent sales before you decide how much cash to hold for the gap.

Locking on a jumbo vs conforming loan

Conforming rates track the agency mortgage bond market and move in step across lenders. Jumbo rates are set by each lender's investors or balance sheet and can move on a different schedule, which is why a jumbo lock from a portfolio bank sometimes holds steady on a day conforming rates jump, and vice versa. Portfolio lenders are also more willing to offer longer locks and float-downs as a relationship perk; ask. On a jumbo, confirm whether a change in loan amount (a common SF event after an appraisal or a renegotiation) re-prices the lock.

Questions to ask every lender in writing

• What lock periods do you offer and what does each cost in rate or fee?
• Is a float-down included? What triggers it, how many times, and what does it cost?
• What is the extension fee per period, and do you waive it when the delay is yours?
• If my loan amount changes, does the lock re-price?
• What is the exact rate reduction per point, and per half point?
• What lender credit do you offer for an eighth and a quarter point higher rate?
• Does the lock survive a change of property under a lock-and-shop program?
• Will you confirm the lock on page 1 of the Loan Estimate the same day?

What to shop for right now

• Rate lock terms and points pricing (savings: medium). Lock length, extension fees and the price per point differ by lender. A free 45-day lock with a float-down can be worth more than a slightly lower headline rate once you account for a single avoided extension on a seven-figure loan.