You found the house. It has the neighborhood, the space, the kitchen, the backyard—or whatever it was that made you think, This could be the one. Then you look at the monthly payment, and suddenly the house you want feels just a little too far out of reach.
Before you walk away, take another look at the numbers. If the monthly payment is the problem, lowering the price of the house isn't necessarily the only—or most effective—way to solve it.
Start With the Payment You Want
When buyers want to make a home more affordable, the first thought is usually to offer less. But before deciding how much you want to negotiate off the purchase price, ask your lender a different question: What interest rate would get my monthly payment where I want it, and what would it cost to get there?
Depending on the loan, you may be able to permanently lower your mortgage rate by paying an upfront cost, commonly called buying down the rate. Instead of paying that cost yourself, you may be able to negotiate a seller credit to help pay for it.
Now the negotiation has a different purpose. You're not simply trying to buy the house for less; you're trying to get the monthly payment as low as possible.
The Same Dollars Can Work Differently
Imagine purchasing a $1 million home with 20% down and an $800,000 mortgage. At 7.25%, the principal-and-interest payment would be approximately $5,460 per month. If that rate could be permanently bought down to 6.75%, the payment would fall to approximately $5,190—a savings of about $270 every month.
Now compare that with negotiating $20,000 off the purchase price. With 20% down, the mortgage would decrease by about $16,000. At 7.25%, that lowers the principal-and-interest payment by only about $110 per month.
That's the part many buyers don't think about. A lower sales price feels like the obvious win, but if the monthly payment is what's keeping you from buying the house, using those negotiating dollars toward a lower mortgage rate may be far more valuable.
The actual cost of buying down a rate varies by lender, loan and market conditions, so the numbers will be different for every buyer. But that's exactly why it's worth asking the question before deciding the house is beyond your budget.
Then Comes the Home Inspection
Once you're in escrow, there may be another opportunity. Your inspections may uncover legitimate repairs, and once those repairs have been negotiated with the seller, the natural solution may be to have the seller complete the work. But that isn't necessarily the only option.
Depending on the transaction and your lender's requirements, the seller may be able to provide a credit in lieu of actually making some of those repairs. For the seller, that can be an attractive alternative. They're contributing the negotiated dollars either way, but they may not have to find contractors, schedule the work, oversee it and get everything completed before closing.
For the buyer, those dollars may be even more useful elsewhere. If allowed by the lender, the additional credit may be available to help buy the mortgage rate down even further.
Now the original negotiation and the repair negotiation can work toward the same goal: reducing the buyer's monthly payment as much as possible. Perhaps the first seller credit helps move the rate from 7.25% to 6.75%. Could an additional negotiated repair credit help move it lower? That's a question worth asking your lender.
Think Beyond the Purchase Price
This is where buying a home becomes more than simply negotiating a number on the sales contract. You're putting together the entire purchase, and every negotiated dollar doesn't necessarily have to be used in the most obvious way.
If your biggest concern is the monthly payment, using allowable seller credits to permanently lower your mortgage rate may make a much bigger difference than simply reducing the purchase price. There are lender requirements and limits on how seller credits can be used, so your lender needs to be part of the conversation from the beginning.
But the idea itself is simple. The buyer wants the house, and the seller wants to sell the house. Sometimes the number standing between them isn't the purchase price—it's the monthly payment.
A seller credit negotiated with the offer may help. A credit negotiated in lieu of agreed-upon repairs may help even more. Together, those dollars may be able to buy the mortgage rate down enough to turn a payment that didn't work into one that does.
The seller gets to sell the home at or closer to the price they wanted, without necessarily having to coordinate agreed-upon repair work. The buyer gets the home they wanted with a monthly payment that works better for them.
That's what a good negotiation is supposed to accomplish. It isn't always about one side getting more and the other getting less. Sometimes it's simply about figuring out what each side actually needs to make the purchase work.
So before you walk away from a home because of the mortgage payment, don't just ask, Can we get the house for less? Ask a better question:
What can we do to get the payment where you need it to be?
You may not need a different house. You may just need a different way to buy it.
Disclaimer: This article is for general informational purposes only and is not intended as mortgage, lending, financial, tax, or legal advice. Loan programs, interest rates, seller credits, and eligibility requirements vary. Buyers should consult with a qualified mortgage professional regarding their individual financing options.
