It's called a 2:1 Buydown. Here's how it works; in year one your interest rate drops buy 2%! This gives you time to settle into your new home with a low interest rate and make any necessary financial adjustments. In year two, it's 1% lower. By year three you are at your full fixed rate. That means you ease into homeownership with lower payments upfront while still locking in your long-term rate. This gives you time to make any necessary adjustments while gaining equity and you aren't throwing money away ever month with renting.