Thinking about using a seller credit or rate buydown to make a Black Creek purchase more comfortable, or to help your listing stand out without a price cut? You are not alone. These tools can be smart in today’s market, but they come with rules and paperwork that you want to get right. In this guide, you will learn what each option means, how program limits work, what to expect in a Chattanooga closing, and a simple example to make the numbers real. Let’s dive in.
What these incentives mean in Black Creek
Black Creek is a master-planned community minutes from downtown Chattanooga, with golf, trails, and several neighborhoods that include both new construction and resales. Builder and seller incentives are common in communities like this. You can explore the community’s amenities and growth plans on the official Black Creek site.
A seller credit is money the seller agrees to contribute toward your costs at closing. It can cover closing costs, prepaids, discount points, or even funds for a rate buydown. Lenders call these “interested party contributions,” and they must be shown on your Closing Disclosure and documented within program limits as outlined by Fannie Mae’s IPC guidance.
A rate buydown uses upfront funds to lower your interest rate and payment. A temporary buydown reduces your payment for the first one to three years, while a permanent buydown uses discount points to lower the rate for the life of the loan. Lenders require a written buydown agreement and escrow for temporary buydowns, and they underwrite your loan at the full note rate. See Fannie Mae’s rules for temporary buydowns for what lenders check.
Important: If a seller or builder funds the buydown, that cost counts toward the seller contribution limits for your loan program per Fannie Mae’s IPC rules.
Program limits you must know
Conventional (Fannie Mae/Freddie Mac)
- With less than 10% down, the max seller contribution is typically 3% of the price.
- With 10% to 24.99% down, the max is 6%.
- With 25% down or more, the max is 9%.
- For investment properties, the max is often 2%.
- Buydown costs funded by the seller count toward these caps. Details are in Fannie Mae’s IPC guidance.
FHA
- Sellers and other interested parties can contribute up to 6% of the sales price toward closing costs, discount points, and buydowns. These funds cannot cover the buyer’s minimum required down payment. See FHA’s overview of seller contributions on FHA.com.
VA
- VA lets sellers pay customary buyer closing costs. Other “seller concessions” are capped at 4% of the property’s reasonable value. Certain items count toward the 4% cap while customary costs do not. Review VA’s rules on closing costs and concessions.
USDA and jumbo
- USDA often mirrors FHA at 6%, while jumbo programs vary by lender and can be stricter. Confirm the exact limit with your loan officer.
How credits and buydowns appear at closing
- Contract terms: The purchase agreement should state the seller credit amount and what it can pay. If a buydown is included, it should reference a written buydown agreement that outlines the payment schedule and timing of the escrow deposit. Lenders expect this to align with Fannie Mae’s buydown documentation rules.
- Qualification: Most lenders underwrite at the permanent note rate, not the reduced temporary rate, as described in Fannie Mae’s buydown guidance.
- Closing Disclosure: Your title team will show seller credits and buydown funds on the Closing Disclosure. All interested party contributions must be disclosed and within the limits in Fannie Mae’s IPC rules.
- Local taxes and fees: Tennessee collects a recordation tax of $0.37 per $100 of value recorded. Factor this and Hamilton County recording fees into your closing cost estimate and any seller credit request. See the statute at Tennessee Code §67-4-409.
A simple Black Creek example
Imagine a $400,000 purchase with 20% down. Your loan amount is $320,000.
- A 2-1 temporary buydown could reduce the monthly payment in year one by the equivalent of about 2 percentage points and in year two by 1 point. The total cost for that subsidy often falls around 1.5% to 3% of the loan amount, but the exact figure depends on current rates and loan terms. Ask your lender for a quote or use a lender’s buydown calculator, like this example from Intercap Lending.
- If the seller funds the buydown, those dollars count toward the seller contribution cap for your loan program. If instead the seller gives a general closing cost credit, that also counts toward the cap.
- If you choose a permanent buydown, discount points typically cost about 1% of the loan amount per point and may reduce the rate around 0.25%. Your lender will price this based on the day’s market.
Always have your loan officer model several scenarios so you can compare a buydown versus a straight closing cost credit.
When a buydown makes sense
For buyers
- You want lower payments while you settle into a new home or wait for other expenses to ease.
- You qualify at the full note rate, but the reduced early payments improve cash flow.
- You plan to stay long enough to benefit, or you have a refinance plan if rates change.
For sellers and builders
- You want to attract attention without a price cut, especially in neighborhoods with both new builds and resales.
- You need to bridge a buyer’s short-term payment comfort level to get to the finish line.
- You understand the net proceeds impact and keep contributions within program caps.
Nationally, concessions became more common in early 2025, with reports showing many sellers offering credits or other incentives. That context can make structured credits or buydowns a smart negotiation tool in the right Black Creek price tier. See the summary of national concession trends reported by The Title Report.
Your Black Creek checklist
- Confirm the loan program and exact seller contribution limit with your lender. Reference the program rules and any lender overlays.
- Verify the qualifying rate. Most loans are underwritten at the permanent note rate, not the reduced buydown rate.
- Put it in writing. Spell out the seller credit and permitted uses in the contract. If using a temporary buydown, include a written buydown agreement and the escrow deposit timeline.
- Check the Closing Disclosure. Make sure credits and buydown funds appear in the right places and that buydown money is held in the required custodial account.
- Loop in the appraiser. Provide documentation of any seller credits or buydown so value is analyzed correctly.
- Model the math. Have your lender show scenarios for a 2-1 buydown versus a straight credit so you can compare payment relief and total cost.
- Account for local taxes and fees. Include Tennessee recordation tax and Hamilton County recording fees when sizing the credit. See Tennessee Code §67-4-409.
- Ask about taxes. The IRS generally treats seller-paid points as if the buyer paid them, which can affect deductibility and basis. Review IRS Publication 530 and talk with your tax professional.
Ready to tailor a strategy to your Black Creek purchase or sale? With a construction-informed approach and local market insight, Melissa Hubbard will help you decide whether a seller credit, buydown, or other path best supports your goals.
FAQs
Can a seller pay to lower my mortgage rate?
- Yes. A seller can fund temporary or permanent buydowns, but those costs count toward the seller contribution limits for your loan program and must be fully documented with the lender. See Fannie Mae’s IPC guidance.
How much will a 2-1 buydown cost on a Chattanooga home?
- It varies with the rate and loan amount, but many examples total a few percent of the loan balance. Ask your lender for a precise quote or use a lender buydown calculator to see your specific numbers.
Will a temporary buydown help me qualify for the loan?
- Usually not. Most lenders underwrite at the permanent note rate, not the reduced temporary rate, so the buydown helps cash flow but does not change the qualifying standard.
Are seller-paid points deductible for buyers?
- The IRS generally treats seller-paid points as if you paid them, which can affect deductibility and your home’s basis. Review IRS Publication 530 and consult your tax professional for guidance specific to you.
