If you're buying a home, you've probably heard the term seller credit tossed around. But what does it actually mean—and why might you want one?

Simply put, a seller credit is when the seller agrees to contribute money toward certain costs of your home purchase. Instead of lowering the price of the house, the seller helps cover some of your closing costs or other expenses allowed by your lender.

Here's a simple example:

Let's say you're buying a $500,000 home and your closing costs are going to be $10,000.

You could negotiate a $10,000 seller credit, which could potentially cover those closing costs and reduce the amount of cash you need to bring to closing.

Pretty helpful, right?

Why would a seller agree to this?

It can be a win-win.

Maybe the seller doesn't want to lower the price of the home, but they're willing to help with your upfront costs. Or perhaps you're asking for a credit because of something that came up during the inspection.

In some situations, a seller credit can also be used toward an interest-rate buydown, which may help lower your monthly payment.

Seller credit vs. price reduction

These aren't quite the same thing.

A price reduction lowers the amount you're paying for the home.

A seller credit can help reduce the amount of money you need to bring to closing.

For example, a $10,000 price reduction on a $500,000 home brings the price down to $490,000. A $10,000 seller credit keeps the purchase price at $500,000 but may help cover eligible closing expenses.

Which is better? It depends. Your lender and I can help determine how much credit you can use and what it can be used for.

One important thing to know

Seller credits aren't unlimited, and there are rules about how much a seller can contribute and what the money can be used for. That's why it's important to talk with your lender before deciding how much to request.

As your Realtor, I can help you determine whether asking for a seller credit makes sense as part of your offer and negotiate the terms with the seller.

The best offer isn't always about getting the lowest price. Sometimes it's about structuring the deal in a way that works best for you.

Thinking about buying a home? Let's talk about your options. I'm happy to help you make sense of the numbers and the negotiation along the way.