Price Cut or Rate Buydown? How to Use Seller Money When Mortgage Rates Top 7%

By Chad Anderson · September 28, 2026

Mortgage rates just crossed 7% for the first time since January 2025. Freddie Mac's 30-year average hit 7.03% on September 24.

That's the bad news.

Here's the part most people miss. When rates go up, fewer people buy. When fewer people buy, homes sit longer. And when homes sit longer, sellers and builders start offering money to get deals done.

That's happening right now. In September, 66% of home builders were offering incentives and 38% were cutting prices. Here in Middle Tennessee, we have 5.59 months of housing supply, which is the most negotiating room buyers have had in years.

So the real question for buyers isn't just "what's the rate?" It's this: when a seller offers you money, what's the smartest way to take it?

YOUR THREE OPTIONS

When a seller or builder agrees to give you money, you can usually use it in one of three ways.

1. Lower the price. You borrow less, so your payment drops.

2. Buy down your rate. The money pays your lender upfront in exchange for a lower interest rate for the life of the loan. These are often called "points."

3. Cover your closing costs. Your payment stays the same, but you bring less cash to the table.

Most buyers default to option one. It feels like the obvious win. But it isn't always the best use of the money.

THE MATH ON $15,000

Let's say you're financing $400,000 on a 30-year fixed loan at 7.03%. Your principal and interest payment is about $2,669 a month.

Now the seller offers you $15,000.

If you take it as a price cut, you borrow $385,000 instead. Your payment drops to about $2,569. That's a savings of $100 a month.

If you use it to buy down your rate, you need to know one number: the break-even rate. In this example, it's about 6.65%. If $15,000 gets your rate below 6.65%, the buydown saves you more each month than the price cut. If it doesn't, the price cut wins.

How far $15,000 moves your rate depends on your lender's pricing that day, your credit, your down payment and your loan type. That's why you can't answer this question from a headline. You need a real quote.

WHY THE MONTHLY PAYMENT ISN'T THE WHOLE STORY

Even when a buydown wins on payment, it isn't automatically the right call. Three things matter just as much.

How long you'll keep the loan. A buydown only pays you back while you have that mortgage. If rates fall and you refinance in two years, the money you spent on the lower rate is gone. A price cut stays with you no matter what.

Your down payment and taxes. A lower price can mean a smaller down payment. It can also help keep your property tax assessment lower over time.

Your cash after closing. If buying the home would drain your savings, using seller money for closing costs might be the smartest move of all. A slightly higher payment is easier to live with than an empty emergency fund.

THERE ARE LIMITS ON SELLER MONEY

You can't ask for unlimited help. Every loan program caps how much the seller can contribute. As a general guide:

Conventional loans: 3% of the price with less than 10% down, 6% with 10% to 25% down, and 9% with more than 25% down.

FHA loans: up to 6%.

VA loans: up to 4% in concessions, plus normal closing costs.

On a $400,000 home with 5% down, that conventional cap is $12,000. So before you negotiate $20,000 in credits, make sure you can actually use all of it.

WHAT THIS MEANS IN MIDDLE TENNESSEE

The median sale price across Middle Tennessee held flat at $450,000 in August, while active listings climbed 10% from a year ago to 14,294 homes. Prices are steady, but buyers have more choices and more time.

That's especially true with new construction. Builders carry a lot of cost while homes sit unsold, so many would rather give you incentives than cut their advertised prices. If you're touring new builds around Middle Tennessee, ask exactly what incentives are available and whether they change if you use your own lender.

THE BOTTOM LINE

At 7%, the buyers who win aren't the ones waiting for a better headline. They're the ones who know how to use every dollar the seller puts on the table.

My advice is simple. Before you sign anything, run both scenarios. Price cut vs. buydown vs. closing costs. Then negotiate for the one that actually does the most for you.

If you're looking at a home right now, send me the price and whatever the seller or builder is offering. I'll run the numbers side by side and show you which option saves you the most. Call or text me at 615-899-CHAD (2423) or 256-509-8200, or email [email protected].

Chad Anderson · Branch Manager · NMLS #372289

loanDepot.com, LLC · NMLS #174457 · nmlsconsumeraccess.org · Equal Housing Opportunity

840 Crescent Centre Drive, Suite 600, Franklin, TN 37067

Rates referenced are national averages from Freddie Mac's Primary Mortgage Market Survey and are not a quote, offer or commitment to lend. Examples are illustrative, principal and interest only on a 30-year fixed loan, and exclude taxes, insurance and mortgage insurance. Buydown pricing and seller contribution limits vary by lender, loan program, down payment and market conditions. All loans subject to credit approval and program guidelines.

Sources: Freddie Mac PMMS (Sept 24, 2026); NAHB/Wells Fargo Housing Market Index (Sept 2026); Realtracs Middle Tennessee data (Aug 2026).