How to Buy a Home With 7% Mortgage Rates: Seller Concessions, Rate Buydowns and Assumable Loans

Freddie Mac's weekly survey put the average 30-year fixed mortgage at 7.32% on October 22, 2026 — down from 7.40% a week earlier, but still above 7% for a fifth straight week. Prices have barely moved: the National Association of Realtors reported a September median of $417,500, up 1.3% on a year earlier.

What has changed is who holds the leverage. Realtor.com's third-quarter 2026 Market Clock counts 66 of the 99 largest metros as buyer's markets or balanced markets loosening towards buyers. Homes sit longer, and sellers who will not cut the price will often pay something else instead. At 7%, the question is not only how much to offer but what to ask for — and the answer is worth more than most buyers expect.

This guide works through the three tools a buyer has against a high rate, with real numbers on a median-priced home: seller concessions, rate buydowns (temporary and permanent) and assumable FHA and VA loans. Every figure is principal and interest on a 30-year fixed loan unless the text says otherwise.

Who this is for: buyers of a home they will live in, with a conventional, FHA or VA loan. What it does not cover: investment properties (concession limits are lower and buydowns are restricted), new-construction builder incentives in detail, and state transfer taxes. Sellers will find their side of the trade in its own section below — a concession is often cheaper for them than a price cut, which is exactly why it is worth asking for.

The leverageWhy sellers are paying now

A seller who listed in the spring priced the home for spring's buyers. Since then the 30-year rate has risen from the mid-6s to above 7%, and the payment on the same loan has gone up with it. In Realtor.com's Q3 Market Clock, 17 of the top 99 metros are outright buyer's markets and another 49 are balanced but loosening; only 27 remain seller's markets, down from 39 a year earlier. Most of the buyer's markets are in the South.

National numbers do not negotiate for you. A local market with 2 months of supply and multiple offers is still a seller's market whatever the national chart says. What matters is the house in front of you: how long it has been listed, whether the price has already been cut, and whether similar homes nearby are closing below their asking price. Your agent can pull those three facts in a few minutes — and they are what decides whether to ask for a price cut, a concession, or both.

Seller concessionsWhat a seller is allowed to pay

A seller concession (lenders call it an interested party contribution) is money the seller puts towards your costs at closing. It does not change the price on the contract, and it cannot go towards your down payment. Each loan program caps it, measured against the lower of the price and the appraised value:

Three details trip buyers up:

• The VA cap works differently. The 4% covers concessions — the funding fee, prepaid taxes and insurance, a buydown, paying off a buyer's debt. The seller can pay the buyer's ordinary loan closing costs on top of that, outside the 4%.
• A concession larger than your actual costs is lost. If closing costs come to $9,000 and the contract says $12,525, the extra $3,525 does not come back to you as cash; on a conventional loan it is treated as a reduction in price, and your loan-to-value is recalculated. Ask for a number your Loan Estimate can absorb — or put the spare towards points.
• The appraisal still has to support the price. Some buyers offer full price "plus concessions" to keep the seller's net intact. That works only if the home appraises at the higher price; if it does not, the cap is measured against the lower appraisal, and the gap has to be renegotiated or paid in cash.

Three ways to spend $12,525Closing costs, a 2-1 buydown or points

Take the median home: $417,500, 10% down, a $375,750 loan at 7.32%, a payment of $2,581.14. The seller agrees to a 3% concession — $12,525 — instead of cutting the price. There are three ways to use it, and they suit different buyers.

The third option is the simplest: let the concession pay your closing costs, which typically run 2% to 5% of the price. That does not lower the payment at all, but it keeps $12,525 in your bank account on moving day — and for most first-time buyers, cash is the tightest constraint, not the monthly figure.

The table below compares the options by what you have paid in total after a number of years — every payment made, plus what is still owed on the loan, minus any cash you kept. A lower number is better.

Three things stand out:

• A 2-1 buydown is not a discount; it is a timing shift. It costs the seller exactly what it saves you, so the totals match the closing-cost option to the dollar. What it buys is breathing room in the first two years — useful if your income is rising, or if you expect to refinance before the payment steps up.
• Points win only over a long horizon. They are the worst choice at three years and the best by a wide margin at ten — $19,000 ahead of the closing-cost option. The break-even is about five years, and it depends heavily on pricing: if a point buys only 0.125 of a percentage point, the break-even stretches to about ten years; at 0.375, it shortens to under three and a half.
• A price cut beats a concession of the same size, slowly. The loan is smaller, so you pay interest on less, and your 10% down payment falls by $1,253. A smaller price can also lower the property tax in states that reassess on sale. The catch is the closing costs: with a price cut you still pay them out of your own pocket on the day.

The refinance questionWhy points and a refinance do not mix

Most buyers taking a 7% loan hope to refinance when rates fall. That hope should decide how the concession is spent.

Suppose rates fall to 6.0% in year three and you refinance. If the seller's money went into points, you have recovered only $7,540 of the $12,525 by then — the rest is gone with the old loan. If it went into a 2-1 buydown, the subsidy is fully used by month 24, and on many buydown agreements any unused balance is credited to the loan if you pay it off early (read yours). Refinancing the remaining $364,150 or so to 6.0% would lower the payment by about $309 a month, recovering $6,000 of closing costs in 20 months — the refinance break-even works the same way for buyers as for people who already own.

The rule of thumb that follows: if you expect to refinance or sell within five years, spend the concession on closing costs or a 2-1 buydown; if you expect to keep the loan for a decade, spend it on points. The same five-year break-even appeared when we priced a point after the October rate jump, and it is no coincidence — it is the arithmetic of a quarter-point per point at 7%.

Assumable loansTaking over the seller's 3% mortgage

FHA, VA and USDA loans are assumable: a qualified buyer can take over the seller's existing loan — balance, rate and remaining term — instead of getting a new one. Most conventional loans are not; their due-on-sale clause requires the loan to be paid off when the home is sold. Millions of FHA and VA loans were written at 2% to 3.5% in 2020 and 2021, and some of them are on homes for sale today.

The rate is the prize. The gap is the problem. Take the same $417,500 home with an FHA loan the seller took out in late 2021: $320,000 at 3.00%, payment $1,349, 60 payments made, $284,500 still owed. You must cover the remaining $133,000 between the price and the balance.

Even with a second loan at 8.5% covering most of the gap, the blended rate is about 4.3% to 4.6%, and the payment is $260 to $440 a month below a new 7.32% loan for the same cash down. Over the next five years the assumed loan charges about $39,700 of interest against $134,000 on a new $375,750 loan — though that comparison flatters it, because the assumed balance is smaller and the second loan's interest comes on top.

What to know before chasing one:

• You must qualify. The servicer underwrites you much like a new loan: credit, income and debt-to-income ratio. An FHA assumption costs at most $1,800 in processing fees; on a VA loan the buyer pays a 0.5% funding fee ($1,423 on this balance) plus a capped processing fee.
• It is slow. Assumptions are handled by the seller's servicer, not a lender competing for your business. Allow 60 to 120 days, and write a longer closing date into the contract.
• The second loan must be allowed. Not every servicer accepts subordinate financing on an assumption, and the second-loan rate is usually well above a first mortgage. Get that quote before you offer.
• The term is shorter. You inherit 25 years, not 30, which raises the payment slightly and pays the loan off sooner.
• VA entitlement matters to the seller. If a non-veteran assumes a VA loan, the seller's VA entitlement stays tied to it until the loan is paid off. A veteran buyer can substitute their own entitlement and free the seller's — which makes veteran buyers the easiest assumers to sell to.

The seller's sideWhy a concession can cost them less than a price cut

For the seller, $12,525 is $12,525 either way: a price cut and a concession of the same size leave the same net proceeds. So why do sellers resist price cuts more?

• The listed price stays. A recorded sale at $417,500 supports the value of the neighbours' homes and the seller's own sense of the price. Appraisers adjust comparable sales for concessions, but the headline number is what the street sees.
• It helps the buyer more per dollar in the short run. A $12,525 cut lowers your payment by $77 a month; the same money as a 2-1 buydown lowers it by $490 in year one. A seller trying to make the payment work for a stretched buyer gets more for the money with a concession.
• It reaches buyers who are short of cash. A buyer who can carry the payment but cannot cover closing costs is a buyer the seller would otherwise lose. That is why concessions show up most in the markets where homes sit longest.

TaxWhat happens to points the seller pays

Points on a loan to buy your main home are generally deductible in the year you pay them — and the IRS treats points the seller pays as if you paid them, so you can deduct them too (Publication 936); you then reduce the home's cost basis by the same amount. The deduction is worth something only if you itemize: in 2026 the standard deduction is $16,100 for a single filer and $32,200 for a married couple filing jointly. On a $375,750 loan, year-one interest is about $27,400; add $12,525 of points and many married buyers would clear the standard deduction in the year of purchase only. A temporary buydown subsidy is not a point and is treated differently. Ask a tax preparer before relying on any of this.

Follow the loanTracking a buydown or an assumed loan

Once the deal closes, the Loan & Mortgage Tracker follows the loan you actually got. Enter the contract — including an assumed loan's real balance and remaining term, not the seller's original numbers — and it checks every payment you log against the schedule. A 2-1 buydown can be entered as two scheduled rate changes, so the tracker shows the step-up in months 13 and 25 before it reaches your bank account. If you are still shopping, the Mortgage Calculator prices any loan amount and rate; and once rates fall, the Refinance Calculator tells you whether a refinance pays back. Owners with a loan near today's rate weighing extra payments against investing will find the same 7% arithmetic from the other side; and how much income a home needs shows why the rate weighs as much as the price.

Where these numbers come fromThe model and its limits

The rate is Freddie Mac's Primary Mortgage Market Survey for October 22, 2026 (30-year fixed 7.32%, prior week 7.40%). The home price is NAR's September 2026 median existing-home price ($417,500, released October 13). The metro counts are from Realtor.com's Q3 2026 Market Clock (17 buyer's, 49 balanced-and-loosening, 6 balanced-and-tightening, 27 seller's, among 99 metros). Concession limits are from Fannie Mae's Selling Guide (B3-4.1-02, interested party contributions) and its temporary buydown rules (B2-1.4-04), HUD's Handbook 4000.1 as revised by Mortgagee Letter 2024-06, and the VA Lender's Handbook, chapter 8. The FHA $1,800 assumption-fee cap and the VA 0.5% assumption funding fee are program maximums; servicers can charge less.

Every payment uses standard amortisation through the same engine as the Loan & Mortgage Tracker. Payments are principal and interest only; taxes, insurance and mortgage insurance are left out, except that the new-FHA row finances the 1.75% upfront premium. Points assume one point lowers the rate by 0.25 of a percentage point; real pricing varies by lender and by day, and the range 0.125–0.375 is shown above. The "total cost" table treats cash kept at closing as worth its face value and earns no interest on it, which slightly favours the price cut and points over the closing-cost option. The assumable example's second loan at 8.5% over 20 years is an assumption, not a quote. None of this is a recommendation of a product or a lender; a written Loan Estimate is the number to decide on.

FAQFrequently asked questions

How much can a seller pay toward a buyer's closing costs?

On a conventional loan for a home you will live in: 3% of the price with less than 10% down, 6% with 10% to 25% down, and 9% with more than 25% down. FHA allows 6%. VA caps concessions at 4% of the home's value, but the seller can also pay your normal loan closing costs on top of that.

Is a 2-1 buydown worth it at 7%?

It lowers the payment by about $490 a month in year one and $250 in year two on a $375,750 loan, at a cost of $8,884. It does not lower the total cost of the loan — it moves money into the first two years. It is worth it when the seller pays, your income is rising, or you expect to refinance before year three.

Should I use seller credits for points or closing costs?

Points pay only if you keep the loan beyond the break-even — about five years at a quarter-point per point. If you are likely to refinance or sell sooner, put the credit towards closing costs or a temporary buydown and keep your cash.

Can I assume someone's 3% mortgage?

If it is an FHA, VA or USDA loan, yes, provided the servicer approves your credit and income. You must pay the difference between the price and the loan balance in cash or with a second loan the servicer allows, and the process usually takes two to four months.

Is it better to ask for a price cut or a seller concession?

A price cut of the same size saves slightly more over time, because the loan and the down payment are smaller. A concession helps more when cash at closing is tight or when you want a lower payment in the first years. Many buyers ask for some of each.

Are seller-paid points tax deductible?

Generally yes, for a loan to buy your main home: the IRS treats them as paid by you, and you reduce the home's cost basis by the same amount. The deduction helps only if you itemize.