Watch the YouTube video if you're a visual learner
When it comes to seller credits, most buyers (and yes, even some agents) only see half the picture.
You might be wondering: Should I use them to lower my closing costs? Or cut my monthly payment?
Good news is you have options. And using them the right way can save you thousands upfront and long-term. Let’s break down the 4 smartest ways to use seller credits.
Seller credits are like coupons from the seller to cover some of your closing costs. They’re often negotiated:
When a home needs repairs.
If you offer a fast closing (think 14 days).
Or by bumping up the purchase price and requesting credits back (the seller still nets the same, but you keep more cash in your pocket at closing).
The simplest play: use credits to pay less at closing.
Cash to Close includes down payment and closing cost, and I like to translate to Total Out of Pocket.
Example: $500,000 home, 5% down.
Without credits: Out of Pocket ≈ $35,500.
With $7,500 in seller credits: New Out of Pocket ≈ $28,000.
When to use this:
When you plan to sell or refinance in the next 1-2 years.
You get the cash benefit upfront and avoid over-investing in a loan you won’t keep long.
Use credits to pay off your PMI upfront, which lowers your monthly payment for the life of the loan. Example below
New payment drops by about $150/month (hypothetical)
Out of Pocket stays about the same (credits go toward buying out PMI).
When to use this:
In slow appreciating markets, where it might take 5-10 years to naturally remove PMI.
Skip this if you’re in a hot market like SoCal, where you might be able to remove PMI in just 1-3 years.
Use credits to lower your interest rate for the life of the loan.
Example: Lowers your payment to $2,600/month.
Still have PMI in this scenario.
Out of Pocket remains about $35,500.
When to use this:
In rising interest rate markets.
If rates keep climbing, you’ve locked in your lower rate for good.
Bonus: As your home value grows, your PMI could fall off naturally, lowering your payment even more.
Use credits for a 1-year or 2-year temporary rate buy down.
Year 1 payment: $2,450/month (1% lower rate).
Year 2 and beyond: back to $2,700/month.
Plus, leftover credits can still lower your closing costs a bit.
When to use this:
In a falling rate cycle, where you plan to refinance soon but want a lower payment now.
It’s the perfect hybrid:
Lower payment now, flexible exit later.
Here’s the cheat code recap:
✅ Use credits to lower closing costs if you plan to refi or sell soon.
✅ Use them to buy out PMI in slow-growing markets.
✅ Permanently lower your rate when rates are rising.
✅ Temporarily lower your payment when rates are falling and you plan to refi.
Seller credits aren’t just “free money.”
They’re a tool to tailor your strategy to your goals, timeline, and market.
Have questions? Want to run your own seller credit game plan?
Let’s connect and map it out.
Clarity creates confidence,
Nathan