If rising rates are making you pause your move in Columbus, you are not alone. Or, if you are selling and want to attract rate-sensitive buyers without a big price cut, you have options. With the right plan, buydowns and seller credits can lower a buyer’s payment or out-of-pocket costs and help both sides reach a win. In this guide, you will learn what they are, how the rules work, and exactly how to structure them in Franklin County so you can move forward with confidence. Let’s dive in.
Buydowns explained
A buydown lowers your mortgage interest rate by prepaying interest. A temporary buydown reduces your rate for a set time, then resets to the note rate. Common versions include a 2-1 buydown in years one and two, or a 1-0 for year one only.
A permanent buydown uses discount points at closing to lower the rate for the life of the loan. Either the buyer, seller, or another third party funds the buydown, and the lender documents it. Your lender must approve the structure and how it appears on your disclosures.
Seller credits explained
Seller credits, also called seller concessions, are funds the seller pays toward the buyer’s closing costs, prepaids, and sometimes discount points or a buydown. They can be a dollar amount or a percentage of the purchase price. Credits lower the buyer’s cash needed at closing and can be a strong negotiating tool when buyers are rate sensitive.
Sellers use credits to keep the contract price intact while improving buyer affordability. Buyers use them to reduce upfront costs or to fund a buydown that lowers the initial monthly payment.
Program limits and rules
Seller credits and buydowns must follow loan-program limits and lender approval. Typical caps include:
- Conventional loans: maximum seller concessions commonly follow the 3/6/9 framework based on down payment: 3 percent with less than 10 percent down, 6 percent with 10 to 25 percent down, and 9 percent with 25 percent or more down. See the lender’s interpretation of the Fannie Mae Selling Guide for details.
- FHA: seller contributions are commonly allowed up to 6 percent of the sales price. Program resources are available at HUD’s FHA page.
- VA: seller concessions generally allow up to 4 percent for certain items. Review the VA Home Loan program overview and confirm specifics with your lender.
- USDA: seller-paid costs commonly allowed up to 6 percent for eligible items. Learn more at USDA’s Single-Family Guaranteed program page.
Underwriting matters. Many lenders qualify you at the permanent note rate even if your first-year payment is lower under a temporary buydown. Others may allow qualification using the reduced payment if the buydown is fully documented and funded. Always confirm the rules early with your lender.
Columbus market context
Whether a seller will agree to credits in Columbus depends on supply, demand, and price point. In multiple-offer conditions, sellers are less likely to accept concessions. When inventory builds, concessions and buydowns become more common.
Check the latest local data before you negotiate. You can review current inventory, days on market, and price trends in the Columbus REALTORS market reports. Use fresh stats to set realistic expectations and structure an offer that fits the market.
Offer language that works
Clear contract language keeps everyone aligned and speeds lender approval. Here is practical, plain-English phrasing you can adapt with your agent and lender:
Requesting a seller credit
- “Seller to credit Buyer $X at closing toward Buyer’s allowable closing costs and prepaids, subject to lender approval and program limits.”
You can also state a percentage of the purchase price if that is easier to size within program caps.
Funding a temporary buydown
- “Seller agrees to provide $X to fund a temporary interest rate buydown per lender requirements. Funds to be escrowed and applied according to the written buydown agreement. Subject to lender underwriting approval.”
Include the exact dollar amount and make the provision contingent on lender acceptance. Your lender will provide the buydown cost and required documentation.
Steps after acceptance
Once both sides agree in writing, keep momentum by following a simple checklist.
Buyer steps
- Notify your lender immediately and share the signed contract language.
- Obtain a written buydown agreement or seller-credit addendum that states the amount and purpose.
- Confirm how the funds will appear on your Loan Estimate and Closing Disclosure, and whether your lender qualifies you at the note rate or buydown rate.
- Ask if additional reserves are required because your initial payment is temporarily reduced.
Seller steps
- Calculate net proceeds after the credit. Subtract your payoff, closing costs, and the agreed credit to see your true bottom line.
- Compare a credit versus a price reduction with your agent. A credit preserves the contract price but reduces your net; a price cut lowers the price itself, which can affect appraisal comparables and taxes.
- Coordinate with the title/closing agent to ensure funds are shown correctly on the Closing Disclosure and paid from your closing proceeds.
Price drop vs credit
Both strategies can work. A price reduction lowers the purchase price and may make the appraisal easier, but it reduces your proceeds and can influence neighborhood comps. A seller credit keeps the price intact and reduces the buyer’s out-of-pocket costs or funds a buydown, but it directly reduces seller proceeds dollar for dollar.
If you are the buyer, run both scenarios. Sometimes a targeted credit that covers closing costs or funds a buydown gives you more monthly relief than a small price cut. If you are the seller, weigh your timeline and market position, and model the net impact with your agent.
For tax questions, rules can be complex when points or credits are paid by a seller. Review general guidance at the IRS website, and talk with a qualified tax advisor for advice on your situation.
Risks and disclosures
Be aware of a few guardrails so your deal stays on track:
- Lender refusal: a lender can decline a buydown or require qualification at the note rate. Confirm treatment early.
- Program caps: do not exceed the concession limits for your loan type and down payment.
- Payment changes: with a temporary buydown, your payment will increase when the buydown period ends. Budget for the reset.
- Disclosures: seller-paid items and buydown funds must be itemized on your Loan Estimate and Closing Disclosure. For an overview of closing costs and disclosures, see the CFPB’s mortgage closing cost guide.
Example scenarios
Scenario A: You put 5 percent down on a conventional loan. You negotiate a seller credit equal to 3 percent of the purchase price to cover allowable closing costs. This uses the common conventional cap for less than 10 percent down. Your lender confirms the amount and shows the credit on the Closing Disclosure.
Scenario B: You negotiate a 2-1 temporary buydown funded by the seller. The lender provides the buydown cost, drafts the buydown agreement, and shows the escrowed funds on your disclosures. Underwriting explains whether you qualify at the note rate or the reduced first-year payment.
Local resources
- Check conforming loan limits for Franklin County at the FHFA site when planning your financing.
- Explore state-backed options and down payment assistance through the Ohio Housing Finance Agency.
- Review federal program resources directly from HUD for FHA, the VA home loan program, and USDA’s guaranteed program.
Next steps
If you want to model a buydown, compare a price change to a credit, or write clean offer language that lenders accept, you deserve clear numbers and a calm plan. With a finance-first approach and local negotiation experience across Franklin County and the northern suburbs, you can structure a deal that fits your budget and timeline. Let’s walk through the options and make the market work for you.
For a friendly, numbers-forward consultation, reach out to Jason Peeler to map your next move.
FAQs
What is a mortgage buydown and how does it lower payments?
- A buydown pre-pays interest to reduce your rate temporarily or permanently, lowering your monthly payment for a set period or the life of the loan, subject to lender approval.
What are the seller credit limits for common loans?
- Typical caps are conventional 3/6/9 percent depending on down payment, FHA up to 6 percent, VA up to 4 percent for certain items, and USDA up to 6 percent; confirm with your lender.
Can seller credits fund a 2-1 buydown in Columbus?
- Yes, sellers can fund temporary buydowns if the lender accepts the structure and it stays within program limits and is disclosed properly on closing documents.
Will my lender qualify me at the reduced buydown payment?
- It depends on the lender and program; some qualify at the note rate, while others may allow qualification at the buydown payment if fully documented and funded.
Are seller-paid points or credits tax-deductible to buyers?
- Tax treatment varies by facts and program; review general information at the IRS site and consult a qualified tax professional for advice.
Are seller credits common right now in Columbus?
- It varies with market conditions; in multiple-offer settings they are less common, and when inventory builds they appear more often; check the latest Columbus REALTORS market reports.
How do I check if my loan amount fits conforming limits in Franklin County?
- Review current conforming limits at the FHFA site and confirm details with your lender.
