Mortgage Answers / Money to Get Started
The Short Answer
A seller credit may reduce cash needed for allowed closing costs. A lower price may reduce the loan balance and payment. The better fit depends on your cash, loan rules and how long you expect to keep the loan. Compare both with the same assumptions before making an offer.
Finding and Buying the Right Home. One changes cash today. The other may change the debt you carry.
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A usable credit may help with allowed costs while leaving your down payment requirement separate.
Separate the down payment, eligible costs, deposits and savings you want to keep.
Ask which costs qualify and what limit applies to your loan.
Get an updated cash-to-close estimate before negotiating the amount.
A price cut may lower the loan balance, but get the actual payment difference before deciding.
Use the same loan type, term and down-payment plan in both comparisons.
Include taxes, insurance, mortgage insurance and fees that apply.
A smaller payment may still leave you needing more cash at closing than a credit would.
Compare money needed now and costs over the time you expect to keep the loan.
Get a written price-cut scenario and a permitted-credit scenario.
Review the loan balance, payments and upfront cash for your likely time in the home.
Keep repair and emergency savings in mind. Do not depend on a future refinance.
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Separate the down payment, eligible costs, deposits and savings you want to keep.
Ask which costs qualify and what limit applies to your loan.
Get an updated cash-to-close estimate before negotiating the amount.
Use the same loan type, term and down-payment plan in both comparisons.
Include taxes, insurance, mortgage insurance and fees that apply.
A smaller payment may still leave you needing more cash at closing than a credit would.
Example only: a $400,000 price, $40,000 down payment and $10,000 closing costs mean a $360,000 loan and $50,000 cash before deposits. An allowed $5,000 credit leaves $45,000 cash and the same loan balance.
A $5,000 price cut makes the price $395,000. Keeping the same $40,000 down payment and $10,000 costs makes the loan $355,000, with $50,000 cash. Costs are held constant only to show the difference; actual costs and loan terms may change.
Seller concessions are contributions toward costs you would otherwise pay. Limits and allowed uses depend on the loan and transaction. The seller need not agree. Ask the lender for the cash needed and full payment under each offer.
No. A usable credit can cut eligible cash costs dollar for dollar. A price cut changes the price and may reduce the loan balance. The effects depend on your down-payment plan and loan terms.
You can negotiate, but the seller need not agree and the lender must approve the credit under the loan rules.
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Fayetteville, NC
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Show Low, AZ
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Boulder, CO
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