Here's something I'm seeing more of this fall: a resale home in the Valley sits a few weeks, the seller's agent calls, and suddenly there's room to talk. Most buyers jump straight to a price cut. Sometimes that's right. But a lot of the time, the smarter ask is a seller credit, and the smartest place to put that credit is your rate.
Builders have been doing this for a while with their own lenders. What I want you to know is that the same tool works on an ordinary resale, with the lender you choose. Let me walk you through it.
Price cut vs. seller credit
A price cut lowers the amount you borrow. That helps, but spread over 30 years, a few thousand dollars off the price barely moves your monthly payment.
A seller credit is money the seller agrees to pay toward your costs at closing. You can use it for normal closing costs, or you can use it to buy down your interest rate. Dollar for dollar, a credit aimed at the rate usually does more for your monthly payment than the same dollars taken off the price. That's not a promise for every deal, and it's exactly why I run both side by side before you write the offer.
Two ways to buy down the rate
A permanent buydown. You (or the seller, through the credit) pay discount points at closing, and your rate is lower for the life of the loan. It's the simplest version, and the benefit lasts as long as you keep the loan.
A temporary buydown. The credit funds an account that lowers your payment for the first year or two, and then the payment steps up to the full note rate. People like the early breathing room. Just know the rate isn't permanently lower, you're still qualified at the full note rate, and the step-up is coming. If rates fall and you refinance, any unused funds are generally applied according to the buydown agreement, so read it.
Which one is better depends on how long you plan to keep the loan, how much the credit is, and what the pricing looks like the day we lock. That's a math question, not a guess.
The limits you need to know
Seller credits aren't unlimited, and this is where deals go sideways if nobody checks early.
- Conventional (Fannie Mae): The cap depends on your down payment and occupancy. For a primary residence or second home, it's 3% of the price or appraised value (whichever is lower) when you put down less than 10%, 6% when you put down at least 10% but less than 25%, and 9% when you put down 25% or more. On an investment property, it's 2%.
- The credit can't exceed your actual closing costs. Anything beyond your closing costs doesn't come back to you as cash. It gets treated as a sales concession, which reduces the price used to figure your loan-to-value.
- FHA and VA have their own limits and their own rules for what counts. I'll check those against your exact scenario.
So the right number to ask for isn't "as much as possible." It's the amount your loan type allows and your closing costs can actually absorb.
Why this matters right now in Phoenix
When homes take longer to sell, sellers get more willing to negotiate, and a credit can be easier for them to say yes to than a visible price drop. Every deal is different, but this fall I'm seeing more buyers in a position to ask. The buyers who get the most out of that are the ones who know what to ask for before they write the offer, not after.
How I'd set it up
- Get pre-approved first, so we know your loan type and down payment, which sets your credit limit.
- Before the offer, I'll run a side-by-side: a price cut vs. a credit toward closing costs vs. a credit toward a permanent or temporary buydown.
- Your agent writes the ask based on the option that actually lowers your cost the most.
- We lock and apply the credit the way the contract says.
That's where shopping matters. I work with 300+ lenders, so I can compare how much rate a given credit actually buys across lenders instead of just one. The pricing on points can vary quite a bit from one lender to the next, and that difference lands directly in your payment.
My take
If you're shopping resale homes in the Valley this fall, don't leave a seller credit on the table, and don't spend it without running the numbers. A credit pointed at your rate can be one of the strongest moves a buyer has in a market where sellers are willing to talk.
Before you make your next offer, start at themcdteam.com and let's run the price-cut vs. buydown comparison on the actual home.
FAQ
Can a seller pay to buy down my rate on a resale home, not just a new build?
Yes. Seller credits toward discount points or a temporary buydown can be used on resale purchases, within your loan program's limits.
How much can the seller credit me?
It depends on your loan type, down payment and occupancy. For conventional loans, Fannie Mae's limits range from 2% to 9% of the lower of the price or appraised value, and the credit can't exceed your closing costs.
Is a temporary buydown the same as a lower rate?
No. It lowers your payment for an initial period, then the payment rises to the full note rate. You qualify at the full note rate.
Is a seller credit better than a price reduction?
Often, for the monthly payment, but not always. It depends on the credit size, pricing and how long you'll keep the loan. I'll compare both on your actual numbers.
This article is general information, not a loan offer or commitment. Program rules and pricing can change, and all loans are subject to credit approval and underwriting guidelines.
Michael McDermott, NMLS 184065 | NEXA Lending, NMLS 1660690 | AZBK 2006218 | Equal Housing Opportunity