Understanding Seller Credits
How a Seller Credit Can Lower Your Rate for Good
A quick reference for buyers and the agents who work with them.
What is a seller credit?
A seller credit is money the seller agrees to contribute at closing to help cover the buyer's costs. It is not cash handed to the buyer. It is applied directly at the closing table, reducing what the buyer has to bring or pay.
How it works
Say the agreed sale price is $450,000 and the seller gives a $10,000 credit. The sale price stays the same on paper. The credit reduces what the seller nets at closing to $440,000, and that same $10,000 is used to permanently buy down the buyer's interest rate instead of going toward closing costs.
Agreed sale price: $450,000 → Seller credit: $10,000 → Seller's net proceeds: $440,000 → Applied to a permanent rate buydown, which lowers your monthly payment for the life of the loan
What a permanent buydown does
The credit pays discount points at closing, which buys the rate down for the entire life of the loan. It is not a temporary teaser rate. The lower payment is the payment for as long as the loan is in place, unless the rate is refinanced later.
How far does $10,000 go? As a rough rule of thumb, 1 discount point is roughly a 0.25% rate reduction, so $10,000 could lower the rate by approximately 0.25% to 0.50%, depending on the loan amount and the day's pricing. Ask for the exact numbers on a specific offer.
A few things worth knowing
Loan programs cap how much credit a buyer can accept, usually a percentage of the sale price. Your lender confirms the max for the specific loan.
Seller credits cannot be used toward the down payment or given to the buyer as cash. They only offset costs at closing.
A credit does not lower the sale price for appraisal or loan purposes. It is a separate line item at closing.
Credits are negotiated as part of the offer and can be a strong tool in a slower market or when a buyer wants a lower monthly payment.
Educational and general in nature. Loan program limits and buydown pricing vary by lender and change daily. Reach out anytime to run numbers for a specific offer.
Want to see the numbers on a real offer?
Ruthie Crawford
Licensed Mortgage Loan Originator, Fairway Independent Mortgage
NMLS #2759858
503-250-4247 | ruthie.crawford@fairwaymc.com
Serving clients in Oregon, Washington, and Arizona
