Sellers may see this as a sneaky way to reduce the price. Here's how it looks from the sellers' perspective. Although buyers sometimes use a closing cost credit to lower the purchase price, this is not always the case. Many buyers, particularly first-timers, are short of the cash they need to pay for the down payment and closing costs. One way to generate cash so the buyers can complete a home purchase is for the sellers to assist with some of the costs in the form of a cash credit at closing.
Lenders have restrictions on how much sellers can credit to buyers at closing.
Most lenders will only allow a credit for the buyers' nonrecurring closing costs. Lenders usually won't permit credits for the buyers' recurring costs, such as mortgage interest and hazard insurance. There are some lenders, however, who will allow credits for all closing costs. A credit from the seller to pay for the buyers' nonrecurring closing costs can't exceed the actual amount of those costs. The way an offer is presented to a seller can influence its chance of success.