Lower Price or Seller Credits? What Saves You More
Should I Ask for a Lower Price or Seller Credits When Buying a House?
If you're getting ready to write an offer on a home in Morris or anywhere in Grundy County, there's one question I want you to ask yourself first. Am I going after the lowest price, or the lowest monthly payment?
Most buyers go straight for the price. And I get it! Knocking $15,000 off a house sounds like a big win when you say it out loud. But when you actually run the numbers, a seller credit used to buy down your interest rate often puts a lot more money back in your pocket every month.
The short answer
On a lot of homes, asking the seller for a credit toward a rate buydown saves you more each month than asking for the same amount off the price. Not always. But often enough that it's worth looking at before you write your offer.
Let's run the numbers
Here's a real example. Say you're buying a $400,000 home with 10% down on a 30-year fixed loan, and the seller is willing to give up $15,000 one way or another.
Option | Rate | Loan amount | Monthly principal + interest |
|---|---|---|---|
Full price, no credit | 7.25% | $360,000 | about $2,456 |
$15K off the price | 7.25% | $346,500 | about $2,364 |
$15K seller credit to buy the rate down | 6.25% | $360,000 | about $2,217 |
Same $15,000 from the seller. One version saves you about $92 a month. The other saves you about $239. That's roughly $147 more in your pocket every single month, or close to $1,800 a year.
Quick note: these numbers are principal and interest only. Your real payment will also include property taxes, homeowners insurance, and with 10% down, most likely mortgage insurance. How far $15,000 actually moves your rate depends on your lender and the market that week.
Why the rate wins
A price cut only shrinks your loan a little. In this example, $15,000 off the price takes about $13,500 off your loan, since your down payment drops a bit too.
A lower rate is different. It works on your whole loan balance, every month, for as long as you have the loan. That's why a 1% drop in rate does more than a 4% drop in price here.
When a lower price might still make sense
I'm not going to tell you a buydown is right every time, because it isn't. A lower price can be the better move if:
You plan to refinance or sell in a few years. A buydown pays off over time. If you won't keep the loan long, a lower price (and a smaller loan balance) may serve you better.
You need help with closing costs. Seller credits can go toward closing costs instead of a buydown. Sometimes getting into the home with cash left over matters more than the lowest rate.
Your loan type caps the credit. Every loan program limits how much a seller can contribute.
What to ask before you write your offer
Before you decide, sit down with your agent (and lender) and ask them to run both scenarios side by side for your exact loan:
What does my payment look like with a price reduction?
What does it look like with the same amount as a seller credit toward a buydown?
How long would I need to keep this loan for the buydown to come out ahead?
How much can the seller contribute on my loan type?
Once you have those answers, we can build an offer around what actually matters for your budget. Sometimes that's price. A lot of times, it's the payment.
Frequently asked questions
What is a seller credit? It's money the seller agrees to put toward your costs at closing. You can use it for closing costs, prepaid items, or to buy down your interest rate, depending on your loan.
What does it mean to buy down your rate? You pay your lender upfront, usually in "points," to get a lower interest rate for the life of the loan. A seller credit can cover that cost so it doesn't come out of your pocket.
Will a seller agree to a credit instead of a price cut? Often, yes. To the seller, $15,000 is $15,000 either way. Some sellers actually prefer a credit because their sale price stays where it is.
Thinking about a move in Grundy, Will, or LaSalle County?
Every deal is different, and your lender can run the exact numbers for your loan. But this is one of those conversations I love having with buyers before we ever write an offer, because it can change your monthly budget for years.
If you're thinking about buying in Morris, Minooka, Channahon, Coal City, or anywhere around Grundy County, send me a message or text me at 815-693-5757. We'll talk through your options and figure out the offer strategy that fits how you actually want to live. You can also grab my free home buyer's guide here:
– Christy Schmaedeke 🐾
