When the seller's dollars are the same, a price cut saved more in total in our example. A seller-paid buydown (seller money that lowers your early payments) saves more in the first two years.
Quick answer: A seller-paid buydown is money the seller puts up at closing to lower your monthly payment for a short time, often two years. A price cut lowers what you borrow for the whole life of the loan. In this guide's example, with the same dollars, the price cut comes out ahead, and its lead grows the longer you keep the loan. The buydown wins on early relief. It can also come out ahead when the seller will give more as a credit than as a cut, if you keep the loan only a few years.
When a seller is willing to give up money, the seller-paid buydown vs price reduction question decides where that money goes. It can lower your payment for a couple of years, or it can lower the price for good.
Both sound like savings, and both are. But they save you money at different times and in different ways. This guide works one Las Vegas example by hand, shows when each choice wins, and covers the loan rules that can tip the answer.
Key takeaways
- Same dollars, different timing. A buydown spends the seller's money in your first two years. A price cut spreads it over the whole loan.
- In our example, the price cut wins in total. It also shrinks the interest charged on the money you did not borrow, so it pulls ahead over time.
- Under Fannie Mae and FHA rules, the buydown does not help you qualify. Lenders size your loan on the full payment, not the lower starting payment.
- Seller credits have limits. Fannie Mae caps them at 3, 6 or 9 percent on a home you live in, and FHA caps them at 6 percent. A price cut has no such cap.
- In Nevada, a lower price does not lower your property tax by itself. The county sets taxable value by formula, not by what you paid.
What is a seller-paid buydown?
A seller-paid buydown is money the seller pays at closing to lower your monthly payment for a set time. The money goes into a buydown account, which is a separate fund that covers part of each payment for you. Your loan itself does not change. You still owe the full payment written in your loan papers once the account runs out.
A common kind is a 2-1 buydown. Your payment is lowest in year one, a bit higher in year two, and at the full amount from year three on. For a look at the three-year version, see how a 3-2-1 buydown works, month by month.
Fannie Mae, the company that buys many home loans from lenders, sets rules for these accounts. Its Selling Guide, section B2-1.4-04, says the money must sit in a custodial bank account, which is an account kept apart from the lender's own money. It also says your only interest in that money is to have it applied to your payments as they come due.
What does a price reduction change?
A price reduction lowers the price on your purchase contract. That one change ripples through the whole deal, and it lasts for the life of the loan.
- You borrow less. If you keep the same cash down payment, every dollar cut from the price comes off your loan.
- Your full payment drops for good. A smaller loan means a smaller payment every month, not just for two years.
- You pay less interest. Interest is charged on what you owe, so a smaller loan costs less to carry.
- It can help you qualify. A lower full payment improves your debt-to-income ratio, or DTI, which is your monthly debts divided by your monthly income before taxes.
If your down payment is set as a share of the price instead, part of the cut lowers the cash you bring to closing. The rest still comes off the loan.
The one idea to hold onto. A buydown lowers what you pay for a while. A price cut lowers what you owe. Only the second one keeps working after year two.
Seller-paid buydown vs price reduction: which saves more?
In the example below, the price cut saves more in total when the seller's dollars are the same. Here is the math, done by hand so you can copy it onto your own numbers. Every figure is an assumption chosen for the arithmetic. None of it is a quote, offer, or commitment to lend.
The setup, illustrative only. A buyer in Henderson agrees to buy a home for $400,000. The seller is willing to give up $10,000, either as a credit or as a price cut.
Choice 1, the buydown. Assume a 2-1 buydown account must cover $476 a month in year one and $244 a month in year two. Year one is 12 times $476, or $5,712. Year two is 12 times $244, or $2,928. The account costs $5,712 plus $2,928, or $8,640. The other $10,000 minus $8,640, or $1,360, goes toward the buyer's closing costs.
Choice 2, the price cut. The price drops to $400,000 minus $10,000, or $390,000. The buyer keeps the same cash down payment, so the loan shrinks by the full $10,000. Assume that cuts the principal and interest part of each monthly payment by $63. That is a difference between the two choices, before taxes and insurance.
Now count what each choice puts in your pocket. For the buydown, that is $8,640 of payment help plus $1,360 at closing, or $10,000. For the price cut, it is the $63 a month you save plus the smaller amount you still owe if you sell or refinance. That second number matters most, and it is the part most comparisons leave out.
| If you sell or refinance after | Buydown: total help | Price cut: payments saved | Price cut: less owed | Price cut: total |
|---|---|---|---|---|
| 2 years | $10,000 | $1,512 | about $9,770 | about $11,280 |
| 5 years | $10,000 | $3,780 | about $9,360 | about $13,140 |
| 10 years | $10,000 | $7,560 | about $8,480 | about $16,040 |
Check the first row. Two years is 24 months, and 24 times $63 is $1,512. Add the $9,770 you no longer owe, and the total is $11,282, or about $11,280. The five-year row is 60 times $63, or $3,780, plus $9,360. The ten-year row is 120 times $63, or $7,560, plus $8,480.
So why does the price cut come out ahead even at two years in this example? Because the $10,000 you never borrowed also never collects interest. The buydown hands you the seller's $10,000 and stops there. The price cut hands you the same $10,000, plus the interest you would have paid on it.
One honest caveat. This simple count ignores timing. The buydown puts its money in your hands in the first two years, when new owners often have the most costs. If that early cash keeps you off a credit card, it can be worth more than the totals show.
Has a seller offered you a credit or a price cut? Get both versions priced first.
Send the price, the seller's offer and your closing cost estimate. A Valley West loan officer can walk you through the buydown, the price cut and the seller credit limit on your own numbers.
The rules and examples on this page are current as of October 1, 2026.
Get your fast quoteWhat if the seller offers more as a credit than as a cut?
Then the answer depends on how long you keep the loan. Some sellers will give more as a credit than as a price cut, so this is the case to run before you sign.
Keep the same home. Say the seller offers a $10,000 credit or a $7,000 price cut. Assume the smaller cut lowers the principal and interest part of each monthly payment by $44, before taxes and insurance. Here is how the two compare over time:
| If you sell or refinance after | $10,000 credit | $7,000 cut: payments saved | $7,000 cut: less owed | $7,000 cut: total |
|---|---|---|---|---|
| 2 years | $10,000 | $1,056 | about $6,840 | about $7,900 |
| 5 years | $10,000 | $2,640 | about $6,550 | about $9,190 |
| 7 years | $10,000 | $3,696 | about $6,330 | about $10,030 |
| 10 years | $10,000 | $5,280 | about $5,930 | about $11,210 |
In this example, the credit is ahead for about the first seven years. After that, the smaller cut pulls ahead. Check the seven-year row: 84 months times $44 is $3,696, plus $6,330 is $10,026. That is just past $10,000.
So here is a simple rule. If you expect to move or refinance within a few years, a bigger credit can beat a smaller cut. If you plan to stay a long time, the cut tends to win.
How much does a 2-1 buydown cost the seller?
It costs whatever your payment help adds up to over the two years. There is no set fee. The account has to hold enough to cover the gap between your lower payments and your full payment, month by month.
Here is the formula. Take the monthly gap in year one and multiply it by 12. Do the same for year two. Add the two numbers. In the example, that was 12 times $476 plus 12 times $244, or $8,640.
The gaps depend on your loan size and your rate, so the cost moves with them. A bigger loan or a higher rate means a bigger account. Fannie Mae's section B2-1.4-04 also says it "does not place a limit on the total dollar amount" of a buydown. Seller credit limits still apply, as the next section shows. For a full payment schedule on your own numbers, our mortgage calculators include a buydown tool.
How do seller credit limits change the choice?
They can make the choice for you. Money from the seller for a buydown counts as an interested party contribution (a payment from someone with a stake in the sale). The seller, a builder and an agent all count. A price cut is not a contribution at all, so no cap applies to it.
Fannie Mae's section B3-4.1-02 says the cost of a seller-funded buydown "must be included" in that calculation. Here are the limits that apply:
| Loan and home | How much you borrow against the value | Seller credit limit | On a $400,000 price |
|---|---|---|---|
| Fannie Mae, home you live in or second home | More than 90 percent | 3 percent | $12,000 |
| Fannie Mae, home you live in or second home | 75.01 to 90 percent | 6 percent | $24,000 |
| Fannie Mae, home you live in or second home | 75 percent or less | 9 percent | $36,000 |
| Fannie Mae, investment property | Any amount | 2 percent | $8,000 |
| FHA | Any amount | 6 percent of the sales price | $24,000 |
Check the math: $400,000 times 0.03 is $12,000, times 0.06 is $24,000, times 0.09 is $36,000, and times 0.02 is $8,000. In the main example, the $10,000 credit fits under even the 3 percent limit.
Two more rules matter. First, Fannie Mae says seller credits must be "equal to or less than the sum of the borrower's closing costs". Second, money over the limit is a sales concession, and it "must be deducted from the property's sales price". In plain terms, extra credit does not help you, and it can shrink the value the lender uses for your loan. FHA has a similar rule: seller money over 6 percent, or over your actual closing costs, is subtracted from the price before the lender sizes your loan. A price cut avoids both problems.
Note one more limit. Fannie Mae does not allow a temporary buydown on an investment property, only on a home you live in or a second home. So for a rental, a price cut or a credit toward closing costs are the usual choices.
For how seller credits work across loan programs, see our guide to who pays closing costs in Nevada.
What if the home appraises low?
Then a price cut can save the deal, and a buydown cannot. The appraisal is an independent estimate of the home's value, ordered for the lender.
Fannie Mae's section B2-1.2-01 says that on a purchase, the property value is "the lower of the sales price or the current appraised value". So the lender uses whichever number is smaller.
Say the $400,000 home appraises at $392,000. With the buydown, the lender values the home at $392,000. The $400,000 minus $392,000, or $8,000, gap usually has to come from your own cash or a new deal with the seller. With a $10,000 price cut to $390,000, the price is already under the appraisal. The gap is gone.
Also, a buydown account cannot shrink the loan for this test. Fannie Mae's section B2-1.4-04 says buydown funds "cannot be used to reduce the mortgage amount" in the loan-to-value ratio. That ratio is the loan amount divided by the home's value.
Does a lower price lower your property tax in Nevada?
Not by itself. Many national articles say a price cut lowers your property taxes. That is true in places where the tax is based on the sale price. Nevada works differently.
Under NRS 361.227, the county assessor sets a home's taxable value by formula. The land is valued at its full cash value. The building is valued at what it would cost to replace, minus 1.5 percent a year for age. The formula does not use your purchase price directly. Sale prices come in only as a check that taxable value stays at or below market value.
Nevada also limits how fast the tax bill on your main home can rise. NRS 361.4723 sets that limit at 3 percent over the prior year's bill for a single-family home that is the owner's primary residence. So in Clark County, the case for a price cut rests on the smaller loan, not on a smaller tax bill.
When does a seller-paid buydown make more sense?
When early cash matters more than the long-run total. Use this quick check.
- A price cut tends to fit when you need help qualifying, the appraisal could come in low, you plan to keep the loan for years, or the seller credit is near its limit.
- A buydown can fit when you qualify easily at the full payment and the first two years will be tight for a reason you can name. It helps most when the seller will give more as a credit than as a cut.
- Run both if you are unsure how long you will keep the loan. The break-even year tells you which one fits.
Keep the qualifying rule in mind. Fannie Mae's section B2-1.4-04 says the lender "must qualify the borrower based on the note rate" (the full rate in your loan contract). The lower bought-down rate does not count. HUD's FHA handbook says the same thing for FHA loans. So under Fannie Mae and FHA rules, a temporary buydown does not help you get approved. It only helps once you are approved.
New homes are a common place to see this choice. Builders often put their incentive money toward a buydown, and our conventional loan site explains how new-home builder incentives in Las Vegas get turned into a rate buydown.
And if you think you might refinance soon, count that in. A refinance ends the buydown early. Under Fannie Mae's rules, leftover money is credited toward your payoff or returned as the buydown agreement says. A price cut, by contrast, carries its smaller balance into the new loan.
How do you ask the seller for the right one?
- Qualify at the full payment first. Ask your lender to run your numbers at the note rate before you make an offer.
- Price both choices in dollars. Get the buydown cost and the monthly drop from a price cut on your own loan.
- Pick your break-even year. Compare the totals at the year you expect to sell or refinance.
- Check the seller credit limit. Add up the seller dollars that count toward your loan's limit, such as the buydown and closing cost credits, and compare the total with that limit.
- Write it into the contract. Name a buydown as a seller credit with a dollar amount, or write the lower price.
- Read the Closing Disclosure. This is the final form that lists your loan costs, and it should show the seller's credit or the new price.
Want the bigger picture on buydowns? Our mortgage rate buydown guide covers the 2-1, the 3-2-1 and the 1-0 side by side.
The Valley West take. In the examples above, a price cut came out ahead when the seller's dollars were the same, because it keeps paying you back after year two. A buydown can still be the right call when the first two years are the hard part and the seller will give more as a credit. Either way, price both on your own loan, check the credit limit, and decide at the year you expect to move or refinance. The appraisal and the lender's final review can still change the numbers.
Buydown vs price cut: FAQ
Which one saves more
Is a seller-paid buydown better than a price reduction?
Usually not in total when the dollars are the same, as in this guide's example. A price cut lowers your loan for its whole life and cuts the interest on the money you did not borrow. A buydown is better for early cash in the first two years, or when the seller offers more as a credit than as a cut.
How much does a 2-1 buydown cost the seller?
It costs the sum of your payment help over two years. Multiply the monthly gap in year one by 12, do the same for year two, and add them. In this guide's illustrative example, that came to $8,640.
Does a buydown help you qualify for a mortgage?
Under Fannie Mae and FHA rules, no. Both have lenders qualify you at the note rate, which is the full rate in your loan contract. A price cut can help, because it lowers the full payment. Other loan programs can differ.
Rules and limits
Does a seller-paid buydown count toward seller credit limits?
Yes. On a Fannie Mae loan it counts toward the 3, 6 or 9 percent limit for a home you live in. On an FHA loan it counts toward the 6 percent limit. A price cut does not count toward any limit.
Does a lower purchase price lower property taxes in Nevada?
Not by itself. Under NRS 361.227, the county assessor sets taxable value by formula, using land value and the replacement cost of the building (what it would cost to rebuild it, less wear for age), not your purchase price directly. NRS 361.4723 also limits the yearly rise in the tax bill on a primary residence to 3 percent.
What happens to buydown money if I sell or refinance early?
Under Fannie Mae's rules, leftover money is credited toward your loan payoff, or returned to you or the lender as the buydown agreement says. Read that agreement before closing.
Article history
October 1, 2026. First published. Fannie Mae Selling Guide sections B2-1.4-04 (dated 08/07/2024), B3-4.1-02 (dated 05/07/2025) and B2-1.2-01 (dated 06/01/2022) were read on Fannie Mae's site that day, using the date shown on each section's own heading.
HUD Handbook 4000.1 was read on HUD's site that day, in the edition whose pages are marked last revised August 12, 2026. NRS 361.227 and 361.4723 were read on the Nevada Legislature's site.
Every dollar figure was worked by hand: the $8,640 account, the $1,360 credit, both comparison tables, the seven-year crossover and the four credit limits.
- Next scheduled review: January 15, 2027. The Fannie Mae and HUD sections are checked again then for any change in the seller credit limits.
About the publisher
Find out which seller offer fits your purchase
One conversation can cover three things. First, whether you qualify at the full payment. Second, what the buydown and the price cut each look like on your own loan. Third, how the seller's offer adds up against your credit limit.
Start your fast quoteAcross Valley West: The same choice plays out a little differently on government loans. Our FHA loan site has an FHA buyer's look at taking a seller credit or a lower price. Our VA loan site covers the VA version, where seller-paid buydown money can count toward the VA's limit on seller concessions (extra help a seller gives a buyer).
Keep reading
- Mortgage rate buydowns explained
- FHA vs. conventional loans
- How a 3-2-1 buydown works
- Debt-to-income ratio
- Seller-paid closing costs by loan program
- Discount points (fees that buy a lower rate)
Sources: Fannie Mae
- Fannie Mae Selling Guide, B2-1.4-04, Temporary Interest Rate Buydowns (08/07/2024). Note-rate qualifying, the custodial account, the "no limit on total dollar amount" line, the loan-to-value rule for buydown funds, eligible property types and leftover funds at payoff.
- Fannie Mae Selling Guide, B3-4.1-02, Interested Party Contributions (05/07/2025). The 3, 6, 9 and 2 percent limits, the closing cost ceiling, sales concessions (seller money over the limit) and the buydown cost rule.
- Fannie Mae Selling Guide, B2-1.2-01, Loan-to-Value (LTV) Ratios (06/01/2022). On a purchase, value is the lower of the sales price or the appraised value.
Sources: HUD and Nevada law
- HUD Handbook 4000.1, FHA Single Family Housing Policy Handbook (last revised August 12, 2026). Section II.A.4.d.iii(G), the 6 percent limit on interested party contributions, which includes temporary buydowns; section II.A.4.a.iii, qualifying at the note rate.
- Nevada Revised Statutes, chapter 361, Property Tax. NRS 361.227, how taxable value is set, and NRS 361.4723, the 3 percent limit on yearly increases for a primary residence.
Verification note
Last updated: October 1, 2026. Every source listed above was read live on October 1, 2026. Every dollar figure was recomputed by hand.
What this page refuses to do
It quotes no interest rate, no annual percentage rate, no loan amount, no loan term, no down payment and no monthly payment amount on any loan. The monthly figures it uses are differences between two choices, and they leave out taxes and insurance. The price, the seller's offer, the buydown account, the monthly drops and the amounts owed are assumptions chosen for the arithmetic, not quotes.
It names no lender other than our own. It is not legal or tax advice. Your purchase contract, your note and your buydown agreement control.
This article is for general information and is not legal, tax or financial advice. Valley West Mortgage is an independent mortgage lender, NMLS #65506, licensed in Nevada. Equal Housing Opportunity. Valley West Mortgage is not affiliated with, or acting on behalf of or at the direction of, Fannie Mae, HUD, the FHA, the Department of Veterans Affairs or any other government agency. Nothing on this page is an offer of credit, a rate quote, a preapproval or a commitment to lend, and loan terms vary by borrower, property and program. All figures are illustrative and not a quote, offer, or commitment to lend.
