Don't Just Negotiate Price.
Negotiate Affordability.

Purchase Price Is Only Part of the Equation.

When buyers evaluate a home, the asking price gets most of the attention. But the financing structure also matters. Depending on the transaction and loan program, a seller credit might help cover eligible closing costs, fund a temporary interest-rate buydown, or contribute toward eligible discount points.

Sometimes the most useful negotiation isn't simply about paying less for the home. It's about how the available concessions are structured.

Four Ways to Structure the Conversation.

1. 01

   Strategy 01Purchase Price ReductionThe seller agrees to reduce the purchase price.

   What It Is

   The seller agrees to reduce the purchase price.

   How It Works

   A lower purchase price may reduce the amount financed and the down payment required, depending on the loan structure.

   Potential Advantages

   • May lower the initial loan amount.
   • May reduce principal and interest payments.
   • May reduce the down payment needed.
   • Reduces the agreed purchase price.

   Important Considerations

   • Monthly payment savings may be relatively modest for a small price reduction.
   • Property taxes and insurance do not necessarily decline proportionally.
   • The actual benefit depends on financing terms.

   When It May Be Useful

   When reducing the purchase price or total amount financed is the priority.

2. 02

   Strategy 02Seller Credit Toward Eligible Closing CostsThe seller agrees to contribute toward certain buyer closing costs, subject to applicable financing rules.

3. 03

   Strategy 03Permanent Interest-Rate BuydownEligible discount points or other permitted financing arrangements are used to obtain a lower mortgage interest rate for the loan.

4. 04

   Strategy 04Temporary Interest-Rate BuydownAn eligible temporary buydown arrangement reduces the borrower's effective payment during an initial period through a funded subsidy.

How a 2-1 Buydown Changes Over Time.

1. Year 1

   Note rate − 2 points = 4.50%

   $2,280/mo P&I
2. Year 2

   Note rate − 1 point = 5.50%

   $2,555/mo P&I
3. Year 3 & Beyond

   Full note rate = 6.50%

   $2,844/mo P&I

Based on the $450,000 loan amount in the comparison above. The temporary buydown subsidy reduces the amount the borrower pays during the introductory period. It does not permanently change the loan's note rate or eliminate the need to afford the full payment.

Never base your purchase decision on an assumption that interest rates will fall or that you will be able to refinance before the temporary buydown expires.

Market the Payment. Protect the Net.

For some listings, a properly structured seller concession may help address buyer affordability concerns without relying exclusively on a price reduction. But every strategy should be evaluated against the seller's expected net proceeds, market conditions, and the buyer's actual financing eligibility.

Marketing a payment example does not establish that a buyer will qualify for the financing shown. Any advertised financing terms should be accurate, appropriately qualified, and reviewed for applicable advertising and lending requirements.

Five Questions That Can Change the Strategy.

1. 01Is my biggest challenge monthly payment or cash required at closing?
2. 02How much seller credit is permitted under my loan program?
3. 03Would a price reduction, closing-cost credit, or rate buydown create the most useful benefit for my situation?
4. 04How long do I realistically expect to keep this mortgage?
5. 05Can I comfortably afford the full payment if a temporary buydown expires?

The most effective financing structure depends on the buyer's goals, the loan program, available pricing, and the seller's willingness to negotiate.

Understand the Details.

Build a Smarter Purchase Strategy.