What r seller credits

[Reyna V Ayala]

I'm trying To run numbers on the bigger pockets calculator. We want to offer 175k on the house and the realtor suggested 6 percent credits. But I'm not sure what that is. Does it buy down the mortgage to 164k? Or does it cover the closing cost and down payment. I'm unsure how to enter this in the calculator 

[Jason Wray]

Reyna,

When a seller offers a seller credit its a contribution towards closing costs. The bank uses the loan amount after the down payment. So on $175K if you go FHA the loan would be $168,875.00 x 6% gives you $10,132.50 in seller credit to pay for closing costs or to buy down the rate.

It does not lower the loan amount it just covers costs.  Getting 6% is very high in this market unless the house has been sitting on the market for awhile with not many offers.