Seller concession limits, by loan type
Every offer negotiation eventually hits the same question: how much can the seller actually pay toward the buyer's side? The answer depends on the loan program and, for conventional loans, the down payment. Here is the whole picture in one table, verified against the current agency guidelines, part of the free realtor toolkit.
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The limits
Swipe across the table to see all columns.
| Loan type | Maximum seller contribution | The fine print that matters |
|---|---|---|
| Conventional, primary or second home | 3% with less than 10% down 6% with 10% to 24.99% down 9% with 25% or more down |
Tiers run off the loan-to-value ratio, and the percentage is calculated on the lower of the sales price or the appraised value. Anything above the cap is treated as a price reduction. |
| Conventional, investment property | 2% at any down payment | The tightest cap on the board. Structure investor deals accordingly. |
| FHA | 6% of the sales price | Covers closing costs, prepaids, discount points, buydowns, and the upfront mortgage insurance premium. Above 6%, the excess reduces the price dollar for dollar for loan purposes. |
| VA | 4% of the value, for true concessions, and normal closing costs do not count against it | The most misunderstood cap in the business. A seller paying the buyer's ordinary closing costs (title, origination, points) is NOT making a concession under VA rules. The 4% cap covers extras: prepaids beyond what is customary, paying off the buyer's debts, and the funding fee if the seller pays it. |
| USDA | 6% of the sales price | Generous cap, and USDA also allows the seller to pay essentially all customary closing costs within it. |
What seller money can and cannot do
- Can: pay closing costs, prepaid taxes and insurance, discount points, and temporary or permanent rate buydowns.
- Cannot: fund the buyer's down payment or minimum required investment on any program, or the buyer's cash reserves.
- Also cannot: exceed the buyer's actual costs. A credit larger than the real closing-cost total does not become cash back; the excess is wasted unless it is restructured, usually into points or a buydown.
The negotiation play this table sets up
In a market where price reductions are common, the same seller dollars usually work harder as a credit than as a cut. A credit applied to a rate buydown changes the buyer's monthly payment far more than the equivalent price reduction does, and the buydown calculator shows both sides of that math with the buyer's own quoted rate. The sequence that wins: confirm the buyer's program, check this table for the cap, size the credit to the actual costs, and put the remainder into the rate.
Before you write it into the contract
Two cautions from real files. First, the cap math runs on the lower of price or appraised value, so an appraisal below contract price can shrink a maxed-out credit. Second, lenders can be stricter than the agency guideline on any program. Thirty seconds with me before the counteroffer goes out saves a mid-escrow addendum: (610) 999-4710, call or text.
Frequently asked questions
How much can a seller contribute on a conventional loan?
It depends on the buyer's down payment: 3 percent of the price with less than 10 percent down, 6 percent with at least 10 but less than 25 percent down, and 9 percent with 25 percent or more down, per Fannie Mae's interested-party contribution limits. Investment properties are capped at 2 percent regardless of down payment.
Do seller-paid closing costs count against the VA 4 percent cap?
Normal closing costs do not. Under VA rules, a seller paying the buyer's ordinary closing costs like title, origination, and discount points is not making a concession. The 4 percent concession cap applies to extras such as prepaids beyond what is customary, paying the buyer's debts, and the seller paying the VA funding fee.
What happens if the seller credit exceeds the program limit?
On conventional and FHA loans, the excess is treated as a sales concession and reduces the price used for the loan calculation dollar for dollar, which can shrink the buyer's loan amount. The practical answer is to size the credit to the cap and the buyer's actual costs before it goes in the contract.
Can seller concessions pay the buyer's down payment?
No, on any program. Seller money can cover closing costs, prepaids, points, and buydowns, but the down payment and any minimum required investment must come from the buyer's own funds or other allowed sources like gifts or down payment assistance.
Is a seller credit better than a price reduction?
For the buyer's monthly payment, usually yes. A credit applied to a rate buydown typically moves the payment several times more than the same dollars taken off the price. Run both versions in the buydown calculator with the buyer's actual quoted rate and show the seller the comparison.
Structure the credit before the counter goes out
Thirty seconds with Dan confirms the cap, the appraisal risk, and where the dollars do the most for your buyer.