Is a Seller Concession the Same as Closing Costs? Plus What a Lender Credit Is

Related, but Not the Same

Buyers often hear "seller concessions" and "closing costs" used together and assume they mean the same thing. They don't. Closing costs are the fees you owe to buy the home. A seller concession is one way to pay some of those fees. A lender credit is another. Understanding the difference helps you know what to ask for and how much cash you'll really need.

What Closing Costs Are

Closing costs are the fees and prepaid items due at settlement, separate from your down payment. For buyers, they typically include lender fees, the appraisal, title insurance and settlement fees, recording taxes, and prepaid items like homeowners insurance, property taxes and interest. My guide to buyer closing costs in Virginia breaks them down, and my Virginia closing costs calculator gives you a rough estimate.

What a Seller Concession Is

A seller concession is an amount the seller agrees, in the purchase contract, to contribute toward your closing costs. It doesn't come to you as cash. Instead, it's credited on the settlement statement and reduces what you have to bring to closing. Each loan program caps how much a seller can contribute; see my guide to seller concession limits by loan type.

So a seller concession isn't a closing cost. It's a credit that pays closing costs.

What a Lender Credit Is

A lender credit is money your lender contributes toward your closing costs, usually in exchange for a slightly higher interest rate. It's the opposite of paying discount points: with points, you pay more upfront for a lower rate; with a lender credit, you accept a higher rate to pay less upfront.

Lender credits can make sense if you're short on cash or don't plan to keep the loan for many years. If you'll stay in the home long-term, the higher rate may cost more over time. Ask your lender to show you the numbers both ways.

Side by Side

A quick way to keep them straight:

Using Them Together

Many buyers combine a seller concession and a lender credit to cover most or all of their closing costs. The total credits can't exceed your actual allowed costs, so planning matters. My guide on seller concessions and lender credits goes deeper, and how to lower closing costs as a buyer lists other options. If you're still building your budget, read how much cash you need to buy a house.

I'll help you decide what to ask for in your offer. Learn more on my buyer's agent page.

This article is general information, not legal or financial advice. Loan program rules, concession limits and lender requirements change, so confirm current details with a licensed lender before you make decisions.