Buyers finally have some leverage again. Especially if you’re using an FHA loan.

Homes are sitting longer. Sellers are actually willing to negotiate. But here’s the big question:

Should you negotiate a price reduction or ask for seller concessions?

I’m going to show you exactly why seller concessions might beat a price drop using real numbers from a $600,000 home. And if you’re considering a 5 year ARM FHA loan, the math gets even better. Here’s a video breakdown if you want to see more examples from actual deals.

Your Two Options

Say you found a $600,000 home. You can go two ways:

1. Get the price dropped Talk them down to $582,000. You just saved $18,000.

2. Keep the price, get cash back Purchase price stays at $600,000, but the seller gives you $18,000 in concessions. You use that money to buy down your rate, pay closing costs, or lower your monthly payment.

Which one actually puts you ahead?

The FHA 5 Year ARM: Why This Changes Everything

Quick breakdown of this loan that makes concessions worth so much more:

What you get:

• Rate locked for 5 full years
• After that, it adjusts once a year
• Can only go up 1% per year max
• Can actually go down if rates drop

This isn’t one of those crazy ARMs from 2008. The rate can’t explode on you. Most FHA buyers using this strategy right now are crushing it. And if you’re thinking about future refinancing options with FHA, you’ll want to know all your moves ahead of time.

The Real Numbers

Here’s what actually happens with each option.

Option 1: Take the $582,000 price

• You borrow ~$571,000
• Rate: 6.423% (FHA 30 year fixed)
• Monthly payment: $4,464

You got your discount. But you’re stuck with that high rate.

Option 2: Take the $18K in concessions

Use that $18,000 to buy down your rate on a 5 year ARM.

• Rate for 5 years: 4.875%
• Monthly payment: $3,117
• You save $470 every single month

Even if rates go up after year 5, your absolute worst case is 5.875%. Still beats the 6.423% you’d get with the price drop.

After 5 Years, You’re Way Ahead

This is where people miss the whole picture.

Take that $470 monthly savings and throw it at your principal for 60 months:

• Extra principal paid: $27,000
• What you owe after 5 years: $509,000

With the price drop option? You’d still owe $534,000 after 5 years. Even though you started with less debt.

The concession strategy puts you $25,000 ahead in equity.

Or Keep the Cash

Maybe you don’t want to pay down the loan. Fine. That $470 a month could go to:

• Emergency fund
• Kids’ college
• Stock market
• Whatever you need

That’s the beauty of lower payments. You get choices.

The 2-1 Buydown Trap

You’ll hear about 2-1 buydowns everywhere right now. Here’s the reality:

Using a 5.981% example:

• Year 1: You pay like it’s 3.981%
• Year 2: Goes up to 4.981%
• Year 3: Back to the full 5.981% forever

Sounds good for two years. Then you’re stuck with that high payment.

The 5 year ARM beats this every time. Lower payments for longer, plus actual equity building.

Which One Should You Pick?

Go for the price drop if:

• You hate any risk of rate changes
• You’re staying put for 10+ years
• Monthly cash flow isn’t tight
• You just want the smallest loan possible

Take the concessions if:

• You want breathing room in your budget
• You’re open to a 5 year ARM
• You’ll actually save or invest the difference
• You understand how ARMs really work

Most first time buyers using FHA? The concessions win. More cash flow, more equity, more flexibility.

Bottom Line

Sellers are negotiating now. That won’t last forever. But getting a deal isn’t just about price anymore. Structure matters more.

Those seller concessions everyone ignores? They could save you $25,000+ over five years if you play it right. The math doesn’t lie.

Just make sure you understand what you’re signing up for. Run your own numbers. Compare everything.

Need Someone to Run Your Numbers?

We’ll show you exactly what these strategies look like with your purchase price, your down payment, your local market. No generic examples. Your actual situation.

FHA, VA, conventional, doesn’t matter. Get in touch and we’ll map out what saves you the most money. Real numbers, no BS, no pressure to pick one option over another.