Seller concessions limits: how much a seller can pay toward your closing costs
A seller concession is money the seller contributes toward your closing costs, prepaids or rate buydown. It is one of the most useful negotiating tools a buyer has — and every loan type caps it.
The limits
| Loan type | Maximum seller contribution |
|---|---|
| Conventional, primary or second home, less than 10% down | 3% of price |
| Conventional, 10% to under 25% down | 6% |
| Conventional, 25% or more down | 9% |
| Conventional, investment property | 2% |
| FHA | 6% |
| VA | 4% of value for concessions (prepaids, funding fee, debt payoff) plus all customary closing costs, uncapped |
| USDA | 6% |
Contributions above the cap are not forfeited by the seller but must be treated as a price reduction for the lender’s purposes — which can change the loan amount and the appraisal math.
What concessions can pay for
Lender fees, title and settlement charges, recording fees, transfer taxes customarily paid by the buyer, prepaid interest, the first year of homeowners insurance, escrow deposits, discount points, and temporary buydown escrows. They cannot pay any part of the down payment (except on VA loans, in effect, because VA requires none) and cannot be handed to you as cash after closing.
Why sellers agree
A seller who nets the same amount usually prefers a higher price with a concession to a lower price with none — agents’ commissions aside, the outcome is identical to them, while for the buyer it converts cash needed at closing into a slightly larger loan. In a buyer’s market, concessions are common; in a seller’s market, they signal a weaker offer unless paired with a price above asking.
The appraisal catch
Raising the price to fund a concession only works if the home appraises at the higher price. Appraisers are told about concessions and may adjust; if the value comes in at the original price, the concession effectively shrinks.
Using concessions well
- Ask the lender for your exact cash to close before you write the offer.
- Request a concession sized to your actual costs, not the maximum — unused concession is lost.
- Consider using it for discount points or a 2-1 buydown if closing costs are already covered.
- Write it as a fixed dollar amount or a percentage, whichever the local contract form favors.
Frequently asked questions
Can the seller pay off my credit cards?
Only on VA loans, within the 4% concession limit. Other loan types do not allow debt payoff as a concession.
Do builder incentives count as concessions?
Yes, when they are financing concessions (paid closing costs, buydowns) rather than upgrades to the home. Builder-paid closing costs tied to using the builder’s lender are concessions and are subject to the same caps.
Can I get a concession and a lender credit?
Yes. Both can apply to the same closing, but total credits cannot exceed your actual closing costs and prepaids; excess lender credits are reduced.
Sources
Related: Closing costs explained: what is negotiable, what is not · Mortgage points and rate buydowns: when paying for a lower rate pays off · Appraisal gap: what happens when the home appraises below your offer · Conventional loan requirements: credit, down payment, DTI, reserves, property. Hub: Conventional loan.