First, did you know when you qualify for a home loan, you’re actually qualifying for the monthly payments?
We know that for a home buyer, nothing takes priority quite like having an affordable mortgage payment. The price you’ll be approved for depends entirely on both your down payment and the maximum payment for which you qualify. And the most significant factor in determining what that payment will be is your interest rate.
For those buyers who opt to use an interest rate reduction mortgage, your real estate agent will negotiate with the seller to accept a fair price if they will give you credit to permanently reduce, or buydown, your interest rate.
Just a reduction of 0.25% in your interest rate could mean tens of thousands of dollars of interest that you will save over the term of your home loan. And this, of course, can mean the difference between affording your dream home and going with option B.
Using this credit (also known as a seller’s concession) to permanently lower your interest rate will lead to a reduction in your mortgage payment, allowing you to afford a higher sales price while keeping your payments right where you needed them to be all along.
At the end of the day, this is a win-win situation for both the buyer and the seller of a home.
The seller benefits as much as the buyer in that the seller gets the offer they wanted, and your below-market interest rate means a lower total payment— even though you offered a fair purchase price at market value.
You may be thinking, “Why don’t I just ask the seller to reduce the price of the home?”
That’s a great question, and most buyers are going to default to assuming this is the way to go. But using an interest rate reduction mortgage means your offer will stand out from the competition. A higher offer gives you a higher chance of sealing the deal.
Because it’s been established you aren’t trying to take any precious money out of the seller’s pocket (by having to make a lower offer), your far more desirable offer will inevitably stand out from all of the other buyers trying to get the lowest price possible.
While a desperate seller may take a low offer, most sellers are going to take the offer that will allow them to make the most money from the sale. Period.
If your offer keeps your payment where you want it to be while the seller also gets what they want, then everybody wins.
A successful negotiation is when all parties feel like they got the best deal. You get your payment. The seller receives their money. Everybody wins.