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Buying a Home

Seller Concessions Explained: How Much the Seller Can Pay (Limits by Loan Type)

Seller concessions can cover your closing costs, prepaids or a rate buydown. Here are the 2026 limits for conventional, FHA, VA and USDA loans.

By · Updated · 5 min read

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Quick answers

  • Seller concessions are costs the seller agrees to pay for you, usually closing costs, prepaid items or a rate buydown.
  • Conventional limits (Fannie Mae): 3% of value if you put less than 10% down, 6% with 10%–25% down, 9% with more than 25% down, and 2% on investment properties.
  • FHA and USDA: up to 6%. VA: normal closing costs plus up to 4% in extra concessions.
  • What they can’t pay: your down payment or required reserves.

Imagine the seller handing you a gift card at closing that can only be spent at the closing table. That’s basically a seller concession. It’s money the seller agrees to put toward costs that would normally be yours: lender fees, title charges, prepaid taxes and insurance, or points to buy down your rate. In a slow market, concessions are one of the best tools a buyer has. You just need to know the limits, because every loan program caps them.

What seller concessions can pay for

  • Closing costs: lender origination fees, appraisal, title insurance, recording fees and similar charges. See our full breakdown of closing costs.
  • Prepaid items: the first year of homeowners insurance, property tax reserves and prepaid interest that go into escrow at closing.
  • Rate buydowns: discount points for a permanently lower rate, or a temporary buydown like a 2-1 buydown.
  • Some program-specific costs: on a VA loan, for example, a seller can pay the VA funding fee as part of the 4% concession.

What concessions can’t do: cover your down payment, your required cash reserves, or any minimum amount the loan program says must come from you. And the seller can’t simply hand you cash back at closing.

The limits by loan type

Loan type Maximum seller concession
Conventional, less than 10% down (LTV over 90%) 3%
Conventional, 10%–25% down (LTV 75.01%–90%) 6%
Conventional, more than 25% down (LTV 75% or less) 9%
Conventional, investment property 2%
FHA 6% of the lower of price or appraised value
VA Normal closing costs, plus up to 4% of reasonable value in other concessions
USDA 6% of the sales price

Conventional limits are from Fannie Mae’s Selling Guide (B3-4.1-02, Interested Party Contributions); Freddie Mac uses the same tiers. FHA, VA and USDA limits are from HUD, VA and USDA program guidelines. Jumbo loans are set by each lender.

ExampleYou’re buying a $350,000 home with a conventional loan and 5% down. The concession cap is 3%, so the seller can pay up to $10,500 toward your costs. If your closing costs come to $9,000, the seller could cover all of it. The extra $1,500 could go toward points to lower your rate. If you’d asked for $14,000, the extra $3,500 above the cap would simply be lost unless the price is renegotiated.

Concession vs. price cut: which is better?

Both cost the seller roughly the same. They help you in different ways:

  • A price cut shrinks your loan, so it lowers your payment a little every month for the life of the loan. It also lowers property taxes in many areas.
  • A concession lowers the cash you need at closing. Or, used for a rate buydown, it can lower your payment more than the same dollars as a price cut, especially at today’s 7% rates.

If cash is tight, a concession is often the smarter ask. If you have plenty of cash and plan to keep the home a long time, the price cut may win. Run both scenarios on the mortgage calculator and the buydown calculator.

Myth buster“Asking for concessions makes my offer weaker.” In a hot market, sometimes. But when many listings have had a price cut, sellers expect to negotiate, and a concession can be easier for them than a lower sale price. That’s because it keeps the recorded sale price, and the neighborhood comps, higher.

How to ask for seller concessions

  1. Know your number first. Get a Loan Estimate so you know your real closing costs. Our guide to the Loan Estimate shows where to look.
  2. Write it into the offer. Concessions go in the purchase contract, usually as “seller to pay up to $X toward buyer’s closing costs and prepaids.”
  3. Use a dollar amount, not just a percent, and keep it at or under your program’s cap.
  4. Watch the appraisal. If you raise the price to “fund” a concession, the home still has to appraise at that higher price.
  5. Use it or lose it. Unused concession money usually goes back to the seller. Ask your lender how to put any extra to work, for example on points.
Fun factFannie Mae calls these “interested party contributions,” or IPCs. The “interested party” is anyone who benefits from the sale, such as the seller, a builder or a real estate agent. A gift from a relative isn’t an IPC, and it has its own rules. See gift funds for a down payment.

FAQ

How much can a seller pay toward closing costs?

It depends on the loan. Conventional: 3%, 6% or 9% depending on your down payment (2% for investment properties). FHA and USDA: 6%. VA: normal closing costs plus up to 4% in additional concessions.

Can seller concessions cover my down payment?

No. Concessions can pay closing costs, prepaid items and buydowns, but not the down payment or required reserves.

What happens if the seller credit is more than my closing costs?

The excess usually can’t be paid to you in cash. You may be able to apply it to points or other allowable costs. Otherwise, the credit is reduced to what you actually owe.

Do seller concessions affect the appraisal?

They can. Appraisers look at concessions in comparable sales, and an inflated price to fund a big credit may not appraise. Keep the price realistic.

Sources: Fannie Mae Selling Guide B3-4.1-02 (Interested Party Contributions); HUD Handbook 4000.1 (FHA seller contributions); VA Lender’s Handbook, Chapter 8 (seller concessions); USDA HB-1-3555. This article is general education, not financial advice. Keys & Coffee is not a lender.

Shivam Kaushik (IMSHIVA)

Written by

Shivam Kaushik· IMSHIVA

Founder & Director, QuibbleTech Solutions Pvt Ltd · Editor, Keys & Coffee

Shivam Kaushik is the founder of QuibbleTech Solutions Pvt Ltd and the editor of Keys & Coffee. He is not a licensed loan officer or financial adviser. Every guide here is written in plain English and checked against official sources such as the CFPB, HUD, Fannie Mae, Freddie Mac and the Federal Reserve. For advice on your own loan, talk to a licensed lender.

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Keys & Coffee is an independent education site. We are not a lender or mortgage broker, we do not take loan applications or payments, and nothing here is financial advice. This site is not affiliated with Axia Home Loans, Axia Financial, LLC, or Planet Home Lending. Rates and rules change often — always confirm details with a licensed loan officer and check any lender on the NMLS Consumer Access site.

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