On this page
- The market has shifted. Your offer should reflect that.
- Read the comps and days on market before you pick a number
- Price versus terms: when to trade one for the other
- Asking the seller to pay closing costs or buy down the rate
- Temporary buydown versus permanent discount point
- Earnest money and the escalation clause
- Contingencies to keep
- What to do after a counteroffer
- After acceptance
The market has shifted. Your offer should reflect that.
Learning how to make an offer on a house starts with local evidence, even when national inventory rises. NAR reported a 4.8-month supply in September 2026, up from 4.5 months a year earlier, with 1.60 million homes on the market and a median existing-home price of $417,500. Freddie Mac’s PMMS put the 30-year fixed at 7.32% on October 22, 2026. That is a national survey average, not a rate quote for your loan.
For a pre-approved buyer, those two facts matter together. More inventory can create negotiating room, but local competition determines how much. Consider both price and terms. This guide covers how to read comps and days on market, when to trade price for terms, how to ask for seller concessions or a rate buydown inside program limits, which contingencies to keep, and what to do after a counteroffer.
If you have not yet locked in a pre-approval, start there. The seller will read the letter alongside your price. See the complete guide to the mortgage pre-approval letter before you submit.
Read the comps and days on market before you pick a number
Ask your agent for recent closed sales similar in size, location, lot, and condition. Ask how differences affect the comparison. Days on market (DOM) measures listing time. Two useful checks are:
- Compare the adjusted sale prices of the closest comps. Use price per square foot as a cross-check rather than treating it as a complete valuation.
- Compare days on market for similar local homes. NAR reported a national median of 33 days in September 2026. That national figure is context, not a deadline after which a seller must negotiate.
Also check the listing’s price history and ask about competing offers. A price reduction or a long listing period can support a concession request, but neither reveals the seller’s minimum acceptable price.
A simple framework for the opening number
- Priced at market, under local median DOM, active showings: consider an offer near list if the comps and your budget support it.
- Priced at market, above local median DOM: discuss an opening discount and concessions with your agent.
- Overpriced by comps, long DOM, price reduction history: start with your comp-supported value and decide which concessions matter most.
Avoid a fixed percentage discount based only on days on market. Set your maximum price and cash-to-close budget before the seller responds.
Price versus terms: when to trade one for the other
Compare seller proceeds as well as your own cash needs. In a hypothetical comparison, $420,000 minus a $10,000 seller credit equals $410,000 before all other selling costs. A $410,000 offer without that credit has the same subtotal. Actual commissions, taxes, and other expenses can differ.
For you, the higher-price offer may reduce upfront closing costs but can increase the down payment and loan balance. It still needs to meet appraisal and loan requirements. This is a price-and-credit comparison, not a payment estimate; no rate, term, taxes, insurance, or mortgage insurance is assumed.
That is the trade a buyer in a softer market can make: offer a price that protects the seller’s number on paper, then direct the concession to what you actually need (lower monthly payment, lower cash to close, or a temporary payment cushion).
Asking the seller to pay closing costs or buy down the rate
Seller contributions are subject to program limits and eligible-cost rules. Ask your lender to approve the proposed credit before you submit. Loan-to-value (LTV) compares the loan with the property value used for underwriting; combined LTV (CLTV) also includes other secured loans.
Under Fannie Mae rules, excess financing concessions reduce the sales price used to calculate LTV/CLTV. Premium-pricing lender credits are excluded from interested party contribution (IPC) limits. Other programs have their own treatment. The standard limits below are ceilings, not an entitlement to a credit.
| Program | Seller/IPC limit |
|---|---|
| Conventional (Fannie Mae), principal residence or second home, LTV/CLTV above 90% | 3% of the lesser of sales price or appraised value |
| Conventional, principal residence or second home, LTV/CLTV 75.01%–90% | 6% |
| Conventional, principal residence or second home, LTV/CLTV 75% or less | 9% |
| Conventional, investment property | 2% at any CLTV |
| FHA | 6% of the sales price |
| VA | 4% of the established reasonable value in seller concessions; ordinary buyer closing costs and normal discount points are separate |
| USDA (guaranteed) | 6% of the sales price for eligible loan purposes |
A detailed breakdown of what each program counts, and what falls outside the cap, is in our guide to seller-paid closing cost maximums by loan type.
For VA loans, seller-paid prepaid property taxes and hazard insurance count toward the 4% concession limit. Other counted items include the VA funding fee, temporary buydown escrows, extra discount points beyond normal market practice, and payoff of borrower debts. Ordinary buyer closing costs and normal discount points do not count toward that limit.
USDA excludes seller-paid buyer real estate commissions from its 6% limit under its published origination FAQ. Have the lender identify every counted charge before you set the credit.
What to put the credit toward
Ask your agent to write the credit for the intended eligible costs and your lender to confirm the wording. Depending on the program and agreement, uses can include:
- Lender fees, title, recording, and transfer taxes.
- The first year of homeowners insurance, the tax escrow, and prepaid interest.
- Discount points to buy the note rate down for the life of the loan.
- A temporary buydown escrow that lowers the payment for the first one, two, or three years.
Unused credit does not come back to you as cash. Size the ask to what the closing statement will actually absorb.
Temporary buydown versus permanent discount point
Both lower the payment. They work differently and the right choice depends on how long you plan to keep the loan.
A permanent discount point
One discount point costs 1% of the loan amount at closing and reduces the note rate for the full term. The rate reduction per point varies by lender and loan offer. There is no fixed rate reduction for one point. For details on when points pay off, see the MMI guide to mortgage discount points.
Worked example (assumptions stated): Sales price $417,500, 10% down, loan amount $375,750, 30-year fixed. Base note rate 7.32% (PMMS, October 22, 2026). Assume one discount point reduces the rate by 0.25 percentage points (an assumption; actual pricing is on the lender’s rate sheet). Taxes, homeowners insurance, and mortgage insurance are not included in these figures.
- Cost of one point: 1% of $375,750 = $3,757.50 paid at closing.
- Monthly principal and interest (P&I) at 7.32%: about $2,581.
- Monthly principal and interest at 7.07%: about $2,518.
- Monthly savings: about $64, using unrounded payments.
- Simple break-even: about 59.1 months; cumulative payment savings exceed the point cost with the 60th payment. This ignores taxes, investment returns, and differences in remaining principal.
If the seller pays the point, compare that use of the credit with covering other eligible closing costs or negotiating a lower price. There is still an opportunity cost. Confirm the rate, point charge, and seller credit with the lender and check the Closing Disclosure.
A 2-1 temporary buydown
A 2-1 temporary buydown subsidizes the borrower’s payment at an amount calculated using a rate two percentage points below the note rate in year one and one point below it in year two. The note rate and contractual payment do not change. In this example, the seller funds an account at closing to cover the difference; the borrower pays the full note payment starting in year three for the remaining 28 years.
Check the written buydown agreement for early-payoff terms. Fannie Mae permits unused funds to reduce the payoff amount or to be returned to the borrower or lender as the agreement specifies.
Worked example (same assumptions as above):
| Year | Rate used to calculate borrower portion | Borrower monthly P&I portion | Monthly subsidy vs note payment |
|---|---|---|---|
| 1 | 5.32% | about $2,091 | about $490 |
| 2 | 6.32% | about $2,331 | about $250 |
| 3–30 | 7.32% | about $2,581 | n/a |
Total buydown account funding: about $8,884.39, or 2.36% of the loan, calculated from unrounded payments. Assume a Fannie Mae-eligible principal residence, appraised value equal to the $417,500 price, and no subordinate financing. At 90% LTV/CLTV, the 6% IPC ceiling is $25,050. This buydown fits within that ceiling alone, but other counted seller contributions use the same allowance. Eligibility and available buydown plans still depend on the lender.
A 2-1 buydown provides a temporary payment cushion. Plan to afford the full note payment without depending on income growth or refinancing. Fannie Mae requires qualification at the note rate. Compare the lender’s written permanent-point and temporary-buydown offers before choosing how to use the seller credit.
Earnest money and the escalation clause
Earnest money shows the seller you are serious. Fannie Mae describes a typical deposit as 1–3% of the offer price, but the amount is negotiable. Confirm who will hold it, when it is due, and how it will be applied at closing.
Refund rights depend on the contract and state law. Have your agent or attorney explain the required notices, deadlines, and any release procedure before you sign. A contingency does not protect a deposit if you fail to use it as required.
An escalation clause tells the seller your offer will beat any other bona fide offer by a set amount (for example, $2,000 over the highest competing offer) up to a stated cap. It is useful on a hot listing with likely multiple offers. Use one only when competition justifies it and the maximum fits your budget. Ask your agent or attorney to specify what qualifies as a competing offer, how it must be documented, and how seller credits affect the comparison.
Contingencies to keep
Three contingencies protect a financed buyer. Waive them only with a specific plan.
Financing contingency. Can let you cancel if you cannot obtain the financing specified in the contract. The terms determine which denials qualify and what you must do to recover the deposit. Match the deadline to your lender’s realistic approval timeline.
Appraisal contingency. Can give you an exit or a chance to renegotiate if the appraised value is below the contract price, depending on the wording. A seller does not have to agree to a price cut. Common appraisal issues (safety, repairs, comparable sales) are covered in five property appraisal problems that can risk mortgage approval.
Inspection contingency. Can let you cancel based on inspection results under the contract’s terms. You can request repairs or a credit, but the seller can decline. Keep time to schedule the inspection, review results, and send any required notice before the deadline.
For more on circumstances that may let a buyer exit a signed contract, see legitimate reasons to get out of your offer on a house.
What to do after a counteroffer
Read the full counteroffer against your budget and the seller’s requested terms. Have your agent or attorney explain its legal effect and expiration before you respond.
- Separate price from terms. If the seller countered on price but accepted your concession ask, ask the lender to recalculate both cash to close and the payment before deciding.
- Protect your contingencies. If the counter weakens an inspection or financing deadline, extend it in your response rather than conceding it.
- Respond on a clock. Use the expiration stated in the counteroffer. Have your lender confirm the new price works with your pre-approval before you sign.
- Use a second concession ask if you move on price. An extra $5,000 of price paired with $5,000 more in seller credit leaves the seller’s price-minus-credit subtotal unchanged, before other costs. Ask the lender how that trade changes your down payment, loan balance, and allowable credit.
- Walk if the math breaks. Reserves, debt-to-income ratio (DTI), and appraisal risk do not disappear because you want the house. A good offer you can afford beats a stretched offer you cannot.
After acceptance
After acceptance, follow the contract’s deadlines and your lender’s documentation requests. Ask which employment, credit, and funds checks remain before closing; pre-approval does not guarantee final approval. For the full timeline from accepted offer to closing day, read what happens after your offer is accepted.
Use local comps to set a price, size the seller credit to eligible costs and program limits, and keep contingency deadlines you can meet. Walk into the negotiation with your lender’s numbers for both a permanent point and a 2-1 buydown so you can direct the credit when the seller responds.
