Michigan Seller Credit Calculator

Michigan Seller Credit Calculator — 2-1 Buydown vs Points vs Price Cut

The short answer: a negotiated seller credit can be spent three ways — a temporary 2-1 buydown, permanent discount points, or a straight price reduction — and which one wins comes down to how long you plan to stay. A buydown front-loads the savings (great for shorter stays); points and a price cut compound the longer you own. This seller credit calculator runs all three side by side over your time horizon, so you stop guessing and put the credit where it returns the most. It’s also a full interested-party-contribution (IPC) engine: it caps the credit at the maximum your program permits — Conventional 3%, 6%, or 9% depending on your down payment, FHA 6%, VA 4%, USDA 6%, and 2% on an investment property — flags any amount over the limit, and shows how the credit lowers your cash to close.

My name is Edward Kalavitz, creator of this seller credit calculator. As a dual-licensed Michigan Realtor and Mortgage Loan Originator, this is a question buyers and agents argue about on nearly every deal — and usually answer by gut feel. The seller credit calculator replaces opinion with math.

Compare the Three Ways to Use Your Seller Credit

How a 2-1 Buydown Works

A 2-1 buydown is a temporary rate subsidy paid from the seller credit. Your rate is lowered by 2% in year one and 1% in year two, then returns to the base rate for the rest of the loan. The dollars that cover the lower payments are calculated up front, funded from the seller credit, and held in an escrow account that releases to the lender each month. The seller credit calculator shows your year-one and year-two payments and totals the relief over your stay.

The appeal is front-loaded breathing room — lower payments exactly when a new homeowner’s budget is tightest. And there’s a safety net: if you sell or refinance before the buydown period ends, the unused escrow is typically credited toward your loan, so the money isn’t wasted. That combination is why a buydown often wins in the seller credit calculator for shorter stays or when a refinance is likely.

Permanent Points vs. a Temporary Buydown

Permanent discount points spend the seller credit to lower your rate for the entire life of the loan — roughly 0.25% of rate reduction per 1% of loan amount. Because the savings never expire, points and the buydown trade places depending on tenure: the temporary buydown delivers more in the early years, but permanent points keep saving long after the buydown is gone, so they overtake it the longer you stay. The seller credit calculator finds that break-even for you, so you’re not guessing whether you’ll be in the home long enough for points to pay off.

When a Price Reduction Beats Both

Sometimes the smartest move is to ask the seller for a lower price instead of a credit. A price reduction permanently shrinks your loan and payment and lowers your long-term basis — and it can win when you plan a short stay, a quick refinance, or simply want the lowest balance. The seller credit calculator models a price cut of the same amount as the credit so you can see, in dollars, when reducing the price beats buying down the rate. Often the answer surprises people — which is exactly why running the comparison matters.

How Much a Seller Can Actually Contribute

A seller credit is an interested-party contribution, and every program caps it. It also can’t exceed your actual closing costs and prepaids — you can’t pocket the difference. Here are the standard limits:

Conventional limits depend on your down payment and occupancy; confirm the exact cap for your loan with a licensed loan officer.

Worked Example: A $12,000 Credit on a $400,000 Home

You negotiate a $12,000 seller credit on a $400,000 purchase. Here is how the seller credit calculator reads it across different stays:

Illustrative figures; permanent-points value depends on live buydown pricing. Run your own deal in the seller credit calculator above.

The lesson the seller credit calculator drives home: there is no universally “best” way to spend a seller credit — only the best way for your time horizon. A buyer planning to move in four years and a buyer settling in for the long haul should structure the same $12,000 completely differently. Knowing which is which before you write the offer is exactly what I help with.

For Agents: Co-Brand This for Your Buyers

This seller credit calculator is also a closing tool for agents. When you can show a buyer — in real dollars — that the $12,000 you negotiated is worth more as a buydown than a price cut, the offer makes sense and the deal moves. I co-brand a version of this analysis for agents to share with their clients, and I’ll structure the credit correctly so your offer is clean and competitive. If you run buyers who need every dollar working, let’s talk — it’s a fast way to win more accepted offers.

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