Seller's Concessions and Paid Rate Buydown

 A Buyer recently informed me his Seller just offered him a 2-point concession…What does this mean and what are the buyer’s options?  

A seller’s concession is a monetary contribution given by a home seller to a potential home buyer to use towards her closing expenses and prepaid items. Lenders allow the seller of a home to “credit” a portion of her proceeds to the home buyer but lenders have limits on the amount of seller’s concession they will permit. Generally, for “conventional” (non-jumbo and sold on the secondary market to Fannie Mae and Freddie Mac, among other investors) loans, if the buyer’s down payment is less than 10%, the seller can contribute up to 3%. If the down payment is 10 – 25%, the Seller can contribute up to 6%. If the down payment is more than 25%, the Seller can contribute up to 9%.

Many mortgage professionals will apply the seller funds to underwriting costs, escrow fees, and loan fees, but some deeper thinkers consider permanently buying down the interest rate on the loan which significantly reduces the monthly mortgage payment. So, in a better case scenario, a buyer can take those offered 2 points and buy her rate down for the life of the loan with the lender.  

For example, if a base rate is 6% on a given product, typically 2 points would buy that rate down to 5.5%.  

Another option, however, is referred to as a Temporary Buydown. In this example, instead of getting 5.5%, a buyer can use the points to buy down the rate to 4% the first year, 5% in year 2, and then the rate would go back to 6% the rest of the way. Ultimately the Temporary Buydown option is a great way to front-load interest savings and if strategically, a buyer either plans on leaving the home soon OR thinks rates could fall, and there is a refi opportunity available in the not-too-distant future, this may be a great way to use that seller concession.


Fernando Branco, GRI, ABR, CNE
Graduate Realtor Institute (GRI) 
Accredited Buyer Representative (ABR) 
Certified Negotiator Expert (CNE)
162 Huntington St, Ste 1R, Brooklyn, NY 11231
c: (212) 321-0115
Working by referral. Let us help you find a home too!!


  1. Beyond its financial dimensions, real estate profoundly influences social dynamics. Urban centers evolve into vibrant hubs of diversity, drawing individuals from all walks of life seeking opportunities and community. The architectural tapestry of a city tells the story of its historical journey, revealing layers of development, triumphs, and challenges.real estate crowdfunding

  2. Commercial real estate, characterized by office buildings, retail centers, hotels, and industrial parks, is a cornerstone of global business operations. The ebb and flow of economic cycles influence the occupancy rates and rental yields of these properties. Technological advancements have also begun to reshape the commercial landscape, with remote work trends impacting office space requirements and the surge in e-commerce driving the demand for distribution warehouses.real estate website design australia

  3. Real estate investment trusts (REITs) provide an avenue for individuals to invest in real estate without directly owning properties. REITs pool funds from investors to purchase and manage income-generating properties, distributing a portion of the profits as dividends.

  4. The concept of homeownership holds cultural and emotional significance for many. Owning a home provides stability, a sense of belonging, and the opportunity to build equity over time. buy real estate in ND and MN

  5. Real estate financing is a critical aspect of the industry, with various options available to both individuals and developers. Traditional mortgage loans, commercial loans, and private financing arrangements all facilitate property transactions. Additionally, the use of innovative financing models, such as crowdfunding and peer-to-peer lending, has gained popularity in recent years, offering alternative sources of capital.sell my house for cash atlanta

  6. "Thankful for your support, I engineer content as a linchpin for establishing potent backlink networks."
    freddie mercury jacket


Post a Comment

Popular posts from this blog

NYC Sales Market Strengthens in April!!

Anne Eisenhower Finds Buyer for Her $35M Southampton Estate