Sellers are becoming increasingly more willing to provide buyer concessions at closing. What is a concession? Sometimes called seller assists or seller contributions, seller concessions are closing costs that the Seller agrees to pay to reduce the cash the Buyer needs to bring to the closing table.  For example, a Seller may give a concession to buy down the interest rate the Buyer will have over a year or two. The amount the interest rate will lower and the term it will be lowered is dependent on the amount of the Seller concession negotiated and the amount of the Buyer’s down payment. 

It is important to consider how you negotiate your purchase. You can lower your monthly payment significantly by applying a Seller concession toward lowering the interest rate vs requesting to reduce the sales price by the same amount. The reason many are doing this is if you lower the interest rate for a year or two it could potentially give time for the market to shift and the rates to go down again. Then the loan can be refinanced to the lower rate. There are risks associated with this approach. If the market does not shift or you cannot refinance due to credit or income changes you run the risk of your payment going up to the original interest rate at the end of the buy down period. This is why it is important to speak to different lenders and compare lending products and evaluate who you feel will provide the best lending advice.