Should I ask the seller for a credit or a lower price?

The seller is willing to give me $10,000 — what should I do with it?

Let's say you're buying a $400,000 home and the seller is willing to negotiate by $10,000. Your first thought might be "Great — let's lower the price to $390,000." But before you do that, let's run the numbers. You may have several ways to structure that negotiation:

• Reduce the purchase price by $10,000.
• Ask for an eligible $10,000 seller credit toward closing costs.
• Use some or all of an eligible seller credit toward discount points to permanently lower your mortgage interest rate.
• Depending on the loan and transaction, use the seller contribution toward an eligible temporary interest-rate buydown.

Will a $10,000 price reduction save me $10,000?

Not in the way many homebuyers think. If you finance the purchase, lowering the sales price by $10,000 generally means you're financing a somewhat smaller amount. The savings are spread across your mortgage — that could lower your monthly payment, but the monthly difference may be much smaller than you expected.

By comparison, an eligible seller credit could potentially help cover thousands of dollars in closing costs or be used toward an eligible interest-rate buydown. And a lower sales price doesn't necessarily solve your immediate cash-to-close problem — for some buyers, that financial cushion after closing is extremely important.

Virginia's rule

Don't negotiate the seller's money until we run the numbers. Before your real estate agent writes the offer, I can compare a price reduction, a seller credit and an interest-rate buydown side by side — including cash left in savings after closing — so you know how each option affects your cash to close and monthly payment.