Save this post if you’re planning to buy a home in 2024!
Most home buyers want a DEAL right? One option is to offer the seller less than the list price because it will help lower your monthly payment, right? Technically yes. But… let’s look at the other option—a seller credit towards a temporary rate buy down.

$14,000 seller credit or $14,000 off the purchase price. Which makes more sense (and cents)?

Seller Credit – Option 1:
Home price $625,000
Down payment 5%
Qualifying interest rate 7.5%
Monthly payment $4151 per month (not including taxes & insurance).
By using your seller credit for a 2-1 buy down, your interest rate goes down 2 points in the first year and goes down 1 point in the second year:

Year 1: rate is 5.5%. Qualifying monthly payment of $4151 goes to $3371 (a savings of $780 per month or $9360 per year)
Year 2: rate goes to 6.5%, and your qualifying monthly payment of $4151 goes to $3752 (a savings of $398 per month or $4784 per year). Total savings after year 2 is $14,144
Year 3: Your rate goes back to 7.5% and your qualifying monthly payment goes back to the original $4151 (however if rates are lower than 7.5% you can refi to a lower rate!)

Compare this to $14,000 off the list price – Option 2:
Reduced Home price: $611,000
Down payment 5%
Qualifying interest rate 7.5%
Monthly payment $4058 per month.
Comparing $4151 to $4058 per month = $93 per month difference (about $2200 after year 1 & 2).

Smart Buyer math proves that lowering your interest rate is better than lowering the price!

If you’re wondering how this works for your situation, let me know and I’ll introduce you to a great Seattle lender who will find the best loan program for you!

Ps: I love it when there’s a connection to people I know. I’m always grateful when you share my posts with people YOU know!

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