How Seller Credits Can Make a Home Purchase More Affordable

When negotiating the purchase of a home, most buyers focus on one number: the purchase price.

But there’s another part of the offer that can potentially be just as important — seller credits.

A seller credit is money the seller agrees to contribute toward certain buyer costs at closing, subject to the rules and limits of the buyer’s loan program.

What Can Seller Credits Pay For?

Depending on the transaction and loan program, seller credits may be used toward eligible closing costs such as lender fees, title and escrow charges, prepaid property taxes, homeowners insurance, and other allowable expenses.

They may also be used in certain situations to help reduce the buyer’s interest rate through discount points or an eligible temporary buydown.

Price Reduction vs. Seller Credit

Imagine a home is listed for $700,000.

A buyer might negotiate the price down by $10,000.

Another option could be negotiating a seller credit instead.

A $10,000 reduction in purchase price doesn’t mean the buyer receives $10,000 at closing. It simply reduces the amount being paid for the property.

An eligible $10,000 seller credit, however, could potentially reduce the amount of cash the buyer needs for allowable closing costs.

Depending on the buyer’s goals, one option may be more valuable than the other.

The Loan Program Matters

Seller contributions aren’t unlimited.

Conventional, FHA, VA, and other loan programs have their own requirements regarding how much a seller can contribute and what those funds can be used for.

That’s why the financing strategy should ideally be considered before the offer is written.

A Home Offer Is More Than a Price

Negotiating a home purchase isn’t always about getting the lowest possible purchase price.

Sometimes the structure of the offer can be just as important.

Understanding how the purchase price, seller credits, closing costs, and interest rate work together can help buyers make a more informed decision about how to structure their purchase.