Rates Are Up. Your Options Are Everywhere. Here's How a 2-1 Buydown or ARM Can Help You Buy Now.

If you've been waiting for mortgage rates to fall before you start shopping for a new home, you're in good company. Plenty of buyers are doing the same thing. But while everyone watches the rate ticker, something else has been quietly happening: the new home market has become one of the most buyer-friendly we've seen in years.

There are more homes to choose from. Builders are competing for your business, and at Berks Homes that includes Flex Cash you can put toward your price, your closing costs, or your rate. And there are smart financing tools designed to bring your monthly payment down while rates are high. The two most useful are the 2-1 buydown and the adjustable-rate mortgage (ARM).

This guide walks through how each one works, what the numbers can look like, what to watch out for, and why acting while you have leverage can be a stronger move than waiting on the sidelines.

Where the Market Stands Right Now

Let's start with the honest picture, because it has two sides.

The challenge: rates. Freddie Mac's weekly survey put the average 30-year fixed mortgage rate at 7.40% in both the October 8 and October 15 readings. That is the highest level in nearly three years, and a big jump from 6.71% in early September. Mortgage applications have been sliding as a result.

The opportunity: choice. Nationally, roughly 485,000 newly built single-family homes were for sale at the end of June, which works out to about 9.3 months of supply at the current sales pace. A balanced market is usually considered to be four to six months. When you combine new and existing homes, the National Association of Home Builders says total supply sits above 5 months, the highest since 2014. Closer to home, active resale listings in Berks County were up about 17% from a year earlier in June.

The response: incentives. Builders are not sitting still. In the NAHB/Wells Fargo survey, 63% of builders reported offering sales incentives in August, and 35% had reduced prices. Our Flex Cash incentive works the same way: it's money you can use to lower your purchase price, cover closing costs, or buy down your mortgage rate, however it helps you most.

Put those together and you get a market where buyers have real negotiating power and a wide range of homes to consider. The one thing standing in the way is the monthly payment. That is exactly the problem a 2-1 buydown or an ARM is built to solve.

Option 1: The 2-1 Buydown

A 2-1 buydown temporarily lowers your interest rate for the first two years of your loan:

• Year 1: your rate is 2 percentage points lower than your note rate
• Year 2: your rate is 1 percentage point lower
• Year 3 and beyond: your rate settles at the note rate for the rest of the loan

Here's the part buyers like most: you don't pay for the lower rate out of pocket. The cost of the buydown is funded up front, often by the builder, and the money is held in an escrow account that covers the difference between your reduced payment and the full payment each month.

A 2-1 buydown does not permanently change your rate. Think of it as a bridge: lower payments while you settle in, then a predictable fixed payment from there.

What it can look like

Here is an illustrative example on a $400,000 loan with a 30-year fixed note rate of 7.40% (principal and interest only, not including taxes or insurance):

Over the first two years, that adds up to roughly $9,500 in lower payments. For a new Homeowner, that cushion can cover window treatments, landscaping, furniture, and the many small costs that show up in the first months in a new home.

Flex Cash gives you another lever. Use it to buy down your mortgage rate, or put it toward closing costs or the purchase price instead. Your New Home Sales Consultant and Berks Home Preferred Lender can show you which mix works best for your budget.

Option 2: The Adjustable-Rate Mortgage (ARM)

An ARM starts with a fixed introductory rate for a set period, commonly 5, 7, or 10 years. After that, the rate adjusts at regular intervals based on a market index. Caps limit how much the rate can move at each adjustment and over the life of the loan, so ask your loan officer to walk you through the exact caps on any ARM you consider.

Why are buyers looking at ARMs now? Because the gap with fixed rates has widened. In mid-October, the Mortgage Bankers Association reported that ARM rates were running almost a full percentage point below the 30-year fixed rate, and ARMs made up 10.5% of all mortgage applications, the highest share in a year. ICE data shows ARMs topped 11% of rate locks in September, their largest share in nearly four years.

New home buyers have leaned on this tool even more. In October 2025, nearly 25% of applications to purchase a newly built home were ARMs, compared with about 9% across the wider market. Builders can often pair an ARM with a permanent rate buydown, which pushes the starting rate lower still.

What it can look like

Using the same $400,000 loan, compare a standard 30-year fixed at 7.40% with a 5-year ARM starting about 0.9 points lower at 6.50% (principal and interest only):

• Fixed at 7.40%: $2,770 per month
• 5-year ARM at 6.50%: $2,528 per month, about $240 less every month, or roughly $14,500 over the five-year introductory period

And here is what happens when that ARM first adjusts after five years, based on what the market is doing at that point:

That last row matters. It's the trade-off you're agreeing to, and it's why an ARM tends to suit people who expect to move, refinance, or grow into a bigger budget within the introductory window.

Side by Side

Why Acting Now Can Beat Waiting

Waiting for rates to fall feels like the safe choice. It's worth remembering that waiting is also a bet, and it's a bet that other buyers will be making at the same time.

Here's what history from just the past year tells us. When rates eased toward the low 6% range last fall, buyers came back quickly. New home sales climbed to their strongest pace since 2023, and builders worked their unsold inventory down from a peak of 9.6 months of supply in May 2025 to 7.9 months by the fall. Demand showed up when the payment became more manageable.

If that pattern repeats, the buyer who waits could be competing with many more people for the same homes, with fewer incentives on the table. Builders use incentives to move homes when buyers are scarce. When buyers return in force, there is less reason to offer them, and pricing power shifts back toward the seller.

To be straight with you: no one can promise where rates or prices will go. Both Fannie Mae and the Mortgage Bankers Association currently forecast that rates will stay elevated through 2027, with Fannie Mae projecting very slow home price growth over that time. That is exactly why these tools make sense. Neither one depends on rates falling.

• If rates stay high, you've used today's incentives and your options in the market to land a payment that works for your budget.
• If rates fall, you can look at refinancing. One loan officer's common rule of thumb is to consider it once rates drop at least half a point, though your own numbers will decide.
• Either way, you've secured a home and a price while you had the widest selection and the strongest negotiating position.

What to Know Before You Choose

We want you to go in with your eyes open. A few things to discuss with your loan officer:

• A buydown is a bridge, not a permanent rate cut. Make sure the year 3 payment fits comfortably in your budget today. Lenders typically qualify you on the full note rate, so the buydown is about cash flow, not stretching what you can afford.
• Refinancing is an option, not a guarantee. It depends on future rates, your credit, your home's value, and closing costs.
• ARMs adjust. Know your adjustment dates, your caps, and how long you realistically plan to stay in the home.
• Run your own numbers. The examples above are illustrations using today's average rates. Your actual rate and payment will depend on your loan amount, credit profile, down payment, and the program you choose.

Who These Options Fit Best

A 2-1 buydown or ARM can be a strong fit if you:

• Want lower payments while you get settled and budget for the costs of a new home
• Expect your income to grow over the next few years
• Plan to move or refinance within five to seven years
• Would rather buy now, with plenty of homes to choose from, than compete later

A traditional fixed-rate loan may be the better fit if you want one predictable payment for as long as you live in the home and your budget is comfortable at today's rate. There is no wrong answer, only the one that fits your life.

How Berks Homes Can Help

This is where we can make it easier. Our current rate-lock 2-1 buydown promotion with CMG Home Loans is designed to help you start with a lower payment in the first two years, available on select Quick Move-in Homes. We've also introduced Flex Cash, a flexible incentive available now with no set end date. Buyers can use it to lower the purchase price, cover closing costs, or buy down their mortgage rate, whichever helps them most. It's their money to put where it works hardest. 

If you want to move quickly, our Quick Move-In and Move-In Ready homes give you a clear timeline and a clear price. Your New Homes Sales Consultant can walk you through home availability, and connect you with a Berks Homes Preferred Lender to model a buydown, an ARM, and a standard fixed loan side by side.

Ready to see what your payment could look like? Connect with a Berks Homes Sales Consultant today and we'll help you compare your options.

Frequently Asked Questions

Is a 2-1 buydown the same as getting a lower interest rate? Not quite. A 2-1 buydown lowers your rate for the first two years only. After that, your payment is based on the full note rate.

Can I refinance later if rates drop? Often, yes, but it isn't guaranteed. Whether it makes sense depends on how far rates fall, your credit, your home's value, and the cost to refinance.

Which is better, a 2-1 buydown or an ARM? It depends on how long you plan to stay and what your budget looks like. A buydown gives you a known two-year step-up to a fixed rate. An ARM can offer lower payments for longer but carries adjustment risk later. Your loan officer can model both for you.

Why would a builder pay for a buydown? Builders use incentives like buydowns to help buyers afford the monthly payment without lowering the price of the home, which also helps protect neighborhood home values.

Rates and payment figures shown are illustrative examples only, not an offer or commitment to lend, and are based on national averages as of October 2026. Actual rates, payments, and terms vary by borrower and lender. Berks Homes incentives are subject to change or withdrawal at any time; terms and conditions apply.