I think I have figured it out after reading some of the other post in this forum and all may not be lost for me.
Basically You are limited to buying down the interest rate with your own funds to the amount determined by using the following equation(this is for Bank of America):
7% of loan value – $3,000 (Bank of America fee paid to NACA) – 3% of any repair funds in escrow
That will determine the max funds you can contribute to buying down interest rate. After that any funds that you contribute would go to principal reduction and Bank of America will match that amount towards buying down your interest rate even further.
If anyone disagrees with my understanding then please let me know. Otherwise I will keep this post up as maybe it will help someone else. I can also provide an actual example if someone wants to see it worked out.