Closing Cost Credit Vs. Reduced Purchase Price
After all the negotiations and the offer on a home has been accepted and the home inspection has been completed and when the home inspection findings are apparent, you might decide that you would like to ask for a couple of different repairs on the home. Once this is done, the seller may have agreed to give you some type of credit conceding that there are, in fact, these particular defects in the home and is willing to correct that defect with a monetary value. There are two ways to collect that monetary value.
1) Closing Cost Credit
2) Reduction of Purchase Price
For example, let’s say the seller has offered the buyer $1,000 for repairs. If you choose to put that $1,000 toward the overall purchase price, in all honesty, it will save you minimal amount of money per month on your mortgage. Really, it doesn’t make much sense and you are not going to see any of that savings or relief. Whereas if you take that $1000 as a closing credit it would allow you to bring $1,000 less to the table for closing costs. You’d actually see that savings! It would be put into your account and you wouldn’t have to bring that cash as part of a down payment at the time of closing.
What the closing cost credit is going to do as you bring less money to the table at the closing, you are actually realizing that savings by keeping your money in your pocket. Taking the reduced purchase price may seem like a better idea in the long run, but over the term of the mortgage it really is an insignificant amount of money. My suggestion to you is to always take the closing cost credit.