Definition
These are any credits applied to reduce what you owe at closing—earnest money you've already deposited, money the seller is giving you toward closing costs, or prorations. They reduce your cash requirement.
Not sure where this fits?
Answer a few questions and we’ll open the path that fits, at the right step.
Find my pathAbout this term
Credits appear on the settlement statement and reduce the amount of cash the buyer must bring to closing. Common types include: seller credits for repairs the buyer agreed to pay for, prorations for taxes and insurance, HOA fee reimbursements, and earnest money credits. Buyer credits are amounts owed to the buyer, while any amounts the buyer owes are debits or charges.
Pro Tip
Carefully track all credits on your settlement statement. Ask your title company to explain any credit you don't understand.
Example
The settlement statement shows: purchase price $300,000, buyer earnest money deposit $10,000 (credit), seller credit toward closing costs $5,000, proration of taxes $1,200 (credit to buyer), resulting in cash needed from buyer of $283,800.