Price cut or seller credit? Run the math.

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By Kasey Jorgenson, designated broker, Jorgenson Real Estate · October 3, 2026

The short version: On a $400,000 home with 10% down at 7.25%, a $10,000 price cut lowers the payment about $61 a month. The same $10,000 as a seller credit for discount points can lower it $84 to $167 a month, depending on the lender’s pricing. Price cuts win for short-term owners and equity; credits win on payment. Seller credits are capped by loan type (3–9% conventional, 6% FHA, 4% VA concessions).

In a higher-rate market, buyers have leverage, and the most common question is how to use it: ask for a lower price, or ask for a seller credit? There isn’t one right answer, but there is real math, and most buyers never see it.

Same $10,000, very different results

Take a $400,000 home, 10% down, and a 30-year rate of 7.25%. The buyer negotiates $10,000. Here are three ways to use it:

Payment is monthly principal and interest. The price cut also means $1,000 less down. “Strong” pricing assumes each point lowers the rate about 0.25%; “weak” assumes 0.125%.

A discount point costs 1% of the loan amount, so $10,000 buys about 2.8 points on a $360,000 loan. How much each point lowers the rate depends entirely on the lender’s pricing that day. The CFPB notes points have no fixed value. Get the actual quote before you negotiate.

When a price cut wins

• The buyer may sell or refinance in a few years. Points pay off slowly, and that money is gone if the loan goes away early.
• Equity matters more to them than the payment. A lower price means a smaller loan. After five years, the price-cut loan balance in our example is about $6,000 lower.
• Cash to close is tight. With a percentage down payment, a lower price means less cash at closing.
• The appraisal is a concern. A lower contract price is easier to support.

When a credit wins

• The monthly payment is the problem. In this example, a buydown saved more than twice as much per month as the price cut.
• The buyer plans to stay put. The longer they keep the loan, the more a lower rate is worth.
• They need help with closing costs. Credits can also cover closing costs and prepaid items.
• A temporary buydown fits. A 2-1 buydown (2% lower the first year, 1% lower the second) on this loan costs roughly $8,500. Buyers must still qualify at the full note rate.

The limits on seller credits

Every loan program caps how much the seller (or other interested parties) can contribute:

• Conventional (Fannie Mae and Freddie Mac): 3% with less than 10% down, 6% with 10% to just under 25% down, 9% with 25% or more down, and 2% on investment property.
• FHA: 6% of the sales price.
• VA: concessions up to 4% of the reasonable value, and normal closing costs don’t count against the 4%.
• USDA: 6%.

A credit can’t turn into cash back. Anything more than the buyer’s actual costs is treated as a concession and comes off the price for lending purposes. Your loan officer has the final word on what’s allowed for a specific loan, so bring them into the negotiation early.

One Texas myth to skip

Don’t promise a buyer that a lower price means lower property taxes. Texas appraisal districts set their own market value as of January 1, and sale prices aren’t required to be reported, so a $10,000 price cut doesn’t automatically change the tax bill.

The bottom line

Most buyers in this market are better served by keeping cash in their pocket or lowering the payment than by shaving a little off the price. But every buyer’s situation is different. Run all three numbers with their lender, show them side by side, and let them choose.

General information, not legal advice. TREC says I can’t practice law, and I like my license. Run your specific situation past your broker or a real estate attorney.

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