Mortgages Below 1%? They Exist, but Only for Those Who Buy Before the Year Ends

The typical age of a first-time homebuyer has reached a record. High prices, stubborn borrowing costs, and limited inventory have steadily pushed the milestone up from age 28 in 1991 to 36 in 2022, 38 in 2024, and 40 today.

It’s a troubling sign, underscoring just how hard it’s become to break into the housing market. Even with recent rate cuts by the Federal Reserve, mortgage costs have remained too steep for many would-be buyers to feel relief. But now, homebuilders are coming to the rescue.

D.R. Horton, the nation’s largest homebuilder, has introduced a mortgage incentive program that drops introductory rates below 1% for qualified buyers. On a $400,000 home with a 10% down payment—the typical amount for a first-time homebuyer today—that could amount to nearly $1,000 in savings per month in the first year, a 36% difference.

Why builders are offering deep rate buydowns

Pending sales across the country have remained sluggish even as overall listings tick higher, according to the Realtor.com® September Housing Report. Total active listings rose 13% year over year, marking a 22-month streak of growth. But despite more choices, buyers remain hesitant, and sales activity has barely budged since summer.

That hesitation has pushed builders to get creative.

“Builders are pulling out all the stops to move their new-home inventory, offering major incentives like the mortgage rate buydown to attract buyers,” explains Joel Berner, senior economist at Realtor.com.

That mortgage rate buydown tackles one of the most persistent thorns in the side of homebuyers today: high mortgage rates. While today’s rates sit comfortably below their historical average of 7.7%, they’re still well above the sub-6% rates that 81% of homeowners are sitting on today.

“Mortgage rates are clearly front and center in the psyche of those who are or are considering being on the market, so breaking down the barrier of the 6%-plus rate may prove effective for these builders trying to get things moving without drastically cutting their prices,” Berner continues. 

He adds that new construction is already in a “buyer-friendlier place” than the resale market, with more months of supply and prices that have held relatively steady as existing-home prices climbed. That leaves builders with both the motivation and the flexibility to use low-rate promotions as a marketing tool.

And they are: Production builders spent an average of 7.5% of each home’s sale price on incentives in the three months ending in August—up from 4.8% a year earlier, according to John Burns Research & Consulting.

How the sub-1% offer works

D.R. Horton’s new mortgage promotion relies on a financing strategy known as a temporary rate buydown. Rather than permanently lowering the interest rate for the full 30-year term, the builder subsidizes the cost of the loan in its early years, easing buyers into ownership with smaller payments upfront.

Under the current promotion, qualified buyers can lock in an introductory rate of 0.99% in the first year, followed by 1.99% in Year 2, 2.99% in Year 3, and 3.99% in Year 4 before the loan resets to the full market rate for the remaining term.

While the ultralow rates don’t last the lifetime of the loan, the short-term impact can still be dramatic. 

“Savvy buyers will recognize a mortgage rate buydown for what it essentially is: a discount on the home,” Berner says.

But just how much can buyers save?

On a $400,000 mortgage, monthly payments might rise from roughly $1,700 in the first year to $2,037 in the second, $2,224 in the third, and $2,425 in the fourth, before stabilizing around $2,933 once the buydown period ends. That amounts to roughly $40,000 in savings over four years.

“Ultimately, what matters is a monthly payment that buyers can afford, whether that comes from a price reduction or a lower mortgage rate,” adds Berner. “Builders are hoping that by offering these attractive rates, buyers will feel like they’re still getting a premium product—but with a discount on the financing instead.”

D.R. Horton isn’t alone in betting on lower financing costs to spark new-home sales. Lennar Corp. also recently launched an Inventory Close-Out Sale, advertising adjustable rates as low as 3.99% for the first seven years of a loan and $15,000 toward closing costs.

Benefits for buyers

So, is the sub-1% mortgage rate a real mechanism to engineer affordability or is it just a marketing tool?

The most immediate advantage is clear: lower upfront payments. By starting with a near-zero interest rate, first-time buyers can ease into the costs of ownership while keeping monthly budgets manageable. 

They can also opt to pay a higher amount per month, knocking off a bigger chunk of their principal balance, building equity faster, and potentially shortening their loan period.

And if mortgage rates continue to decline, buyers have the option to refinance into a permanent lower rate once the promotional period ends, essentially locking in savings twice.

Many builders are also pairing low-rate offers with additional perks such as paid closing costs, free appliances, or design upgrades, offering additional ways for buyers to get more bang for their buck.

While the buydown itself is temporary, the opportunity it creates is long-term: a path into a market that has felt out of reach for much of the past three years.

What buyers should watch out for

As attractive as a sub-1% rate sounds, buyers need to understand the fine print. Temporary buydowns don’t last forever. Ensure that you will be able to afford your payments once the introductory period ends, or you could get caught carrying a mortgage you can’t afford.

Experts also caution that refinancing isn’t a sure thing. If rates remain elevated or personal finances change, rolling into a lower long-term rate later may not be possible.

Finally, shoppers should weigh whether the incentive justifies the home’s overall price. Builders may prefer to maintain headline pricing and compete through financing deals, but for some buyers, a traditional price reduction could still make the most sense.