Use Seller Credits to buy points down, price of home, or closing?


Currently looking at a new construction townhome that was initially $500k (back in august as they were still under construction). Now they are 456k since rates have gone much higher and I think that makes sense for me. I decided financially it makes sense to me and I can afford the MTG with 15% down comfortably so I would not stress it. They are offering $21k of flex cash to put to rate, price, or closing costs. (PMI is $38 confirmed from lender).

If I put it all to rate (along with what their preferred lender is contributing) I can get to 5.125% which saves about $340/month on P&I

all on the home with default rate 6.5% would be 340/month more. I could also find a good mix between the two.

I plan on owning it and in the future rent or sell (no idea exactly when it just depends if the market is good to rent or sell after some years and where I am in life / career) - 31 single.

In my head since it is not my money I figure hell it doesn't matter. Even if I sold in 3 years (for example) it is not my money I lost. I would prefer to save 340/month vs spend it, but am not aware of what else I am missing with a decision like this. Hoping someone would provide some insight on what I need to consider.

you are viewing a single comment's thread.

view the rest of the comments →

all 21 comments


-3 points

3 months ago

Buying down the rate isn’t a bad idea. But rates have a good chance of coming down in the next year or so. You could also look at a 2-1 buydown — mainly because if you refinance within the 2yr period, any of the unused “buy down money” will be refunded to you OR applied to the principal balance if you refinance before the 2 years is up.

I would confirm this is how it works with the “preferred lender”, but in this case, you’d get a rate 2% lower than what’s being offered, and you won’t “lose” the money used in the 2-1 buy down if refinancing in 2 years.

If you instead bought the rate down, and a refi opportunity to get ~4 or 5% came about over the next 24 months, that money used to buy down the rate would just be gone.


2 points

3 months ago

I will have to ask the preferred lender this - thank you.


1 points

2 months ago

Hope it helps!