Sellers Use Mortgage Discounts to Help Buyers Afford Homes

With mortgage rates near a three-year high and homes taking longer to sell, more sellers are offering financial help instead of relying only on a lower asking price. Common offers include credits for discount points, closing costs, repairs or homeowners association fees. The approach is spreading beyond homebuilders to individual sellers, especially in markets where buyers have more negotiating power.

A rate buydown can reduce a buyer’s monthly payment more than an equivalent price cut. In one example, a $10,000 seller credit on a $400,000 home lowered the permanent rate to 6.75% and saved about $135 each month. A temporary 2/1 structure saved $418 monthly in its first year, while reducing the price by $10,000 saved about $70 per month. Conventional mortgage rules generally limit seller assistance to 3% to 6% of the purchase price. In Denver, one $1.15 million sale included $25,000 for a buydown that brought the rate to 5.99%.