The seller agrees to give you $17,000. You can take it off the price, or take it as a credit toward a 2-1 buydown. Same dollars — very different first two years.
The short answer: on the example below, a $17,000 price reduction saves about $88 a month. The same $17,000 used as a seller credit toward a 2-1 buydown saves about $914 a month in Year 1 and $468 a month in Year 2. After that, the price reduction is the one still saving you money. Which is better comes down to how long you expect to keep this loan, and how much the first two years matter to your budget.
When a home has been sitting, or an inspection turns something up, sellers often agree to give something back. Most buyers instinctively ask for a lower price. That’s not wrong, but it’s not the only option — and on a Los Angeles-sized loan, it’s often not the one that changes your monthly payment the most.
The alternative is to keep the price where it is and ask for the same dollars as a seller credit at closing, used to fund a temporary 2-1 rate buydown. The seller isn’t making your payments. The credit is a one-time amount at closing that funds the buydown, and the buydown lowers the rate your payment is calculated on for the first two years.
A $900,000 Los Angeles purchase with 20% down on a 30-year fixed conventional loan at a 6.75% note rate. Principal and interest only.
| No concession | Option 1: $17,000 off the price | Option 2: $17,000 credit toward a 2-1 buydown | |
|---|---|---|---|
| Purchase price | $900,000 | $883,000 | $900,000 |
| Down payment (20%) | $180,000 | $176,600 | $180,000 |
| Loan amount | $720,000 | $706,400 | $720,000 |
| Year 1 payment | $4,670 | $4,582 (saves $88) | $3,756 at 4.75% (saves $914) |
| Year 2 payment | $4,670 | $4,582 (saves $88) | $4,202 at 5.75% (saves $468) |
| Year 3 and after | $4,670 | $4,582 (saves $88) | $4,670 at the full 6.75% |
| Saved in the first 2 years | — | about $2,117 | about $16,587 |
The 2-1 buydown on this loan costs about $16,587: the $914 monthly reduction times 12, plus the $468 monthly reduction times 12. The $17,000 credit covers it, with roughly $400 left over that could go toward other allowable closing costs.
Over the first two years, Option 2 puts about $14,500 more back in your monthly budget than Option 1. The price reduction keeps saving $88 a month after that, so on payments alone it doesn’t catch up until somewhere around year 15 — and only if you keep the same loan that long without refinancing or selling.
It moves real money into the first two years, when most buyers are stretched the hardest — after the down payment, closing costs, moving and furnishing. If you expect your income to rise, or you’re hoping to refinance if rates come down, those are also the two years that matter most.
Where the loan program requires it, you qualify using the payment at the full 6.75% note rate ($4,670 here), not the Year 1 payment. A buydown makes the first years easier; it doesn’t make a payment you couldn’t otherwise qualify for fit. Plan your budget around Year 3 from day one.
Seller credits count toward your loan program’s seller-contribution limit, together with any other seller-paid closing costs. On a conventional primary-residence loan with 20% down, that limit is typically 6% of the price, so a $17,000 credit fits comfortably. Smaller down payments and other programs can have lower limits, and not every loan allows a temporary buydown.
Either way, the seller nets roughly $17,000 less. That’s what makes this a real choice for you as the buyer: you’re not asking for more, just deciding how to receive it.
A price reduction usually makes more sense if you expect to keep this loan for a long time, your cash to close is tight, the appraisal is a concern, or the first-year payment already fits your budget comfortably.
A seller credit toward a 2-1 buydown usually makes more sense if the early payments are the pressure point, you expect your income to grow over the next couple of years, or you think there’s a reasonable chance you’ll refinance or move well before the price reduction would catch up.
Some buyers split it: part of the concession as a lower price, part as a credit toward closing costs or a buydown. The best answer depends on your actual price, loan amount, rate and the credit the seller will agree to — which is exactly why it’s worth running the numbers before you write the counteroffer.
Want three years of relief instead of two? A 3-2-1 buydown uses the same idea but needs roughly twice the seller credit. The calculator shows both.
Example only. Payments are principal and interest on a 30-year fixed loan at an illustrative 6.75% note rate and do not include taxes, insurance, mortgage insurance or HOA dues. Temporary buydown availability, seller-contribution limits and qualifying rules vary by loan program and lender. Not a Loan Estimate or commitment to lend. Equal Housing Lender.