Every Loan Type Has Its Own Cap
Seller concessions, sometimes called seller credits, are money the seller agrees to put toward your closing costs. They can make a big difference for buyers who have saved for a down payment but are short on cash for closing. But each loan program limits how much a seller can contribute, and the limits work differently.
This guide covers those limits by loan type. If you're new to the idea, start with my guide to seller concessions and lender credits.
Typical Seller Concession Limits
These are the commonly cited program limits as of this writing. Your lender will confirm the exact limit for your loan.
| Loan type | Typical limit | Notes |
|---|---|---|
| FHA | Up to 6% of the sales price | Can cover closing costs, prepaids and discount points |
| VA | Normal closing costs plus up to 4% in concessions | The 4% cap covers items like prepaids, the funding fee and paying off buyer debts |
| Conventional, 10% down or less | Up to 3% | Primary or second home |
| Conventional, more than 10% down | Up to 6% | Primary or second home |
| Conventional, 25% or more down | Up to 9% | Primary or second home |
| Conventional, investment property | Up to 2% | Regardless of down payment |
| USDA | Up to 6% of the sales price | Toward closing costs and eligible prepaids |
General guide only. Limits are set by FHA, VA, USDA, Fannie Mae and Freddie Mac and can change; some lenders add their own rules.
FHA Seller Concessions
FHA allows seller contributions up to 6% of the sales price toward closing costs, prepaid items and discount points. That's generous, and it's one reason FHA is popular with first-time buyers. The contribution can't be applied to your minimum down payment. See my guide to FHA loans.
VA Seller Concessions
VA works a little differently. A seller can generally pay your normal, customary closing costs without counting against a cap. Separately, "concessions" such as paying the VA funding fee, prepaid taxes and insurance, or even paying off some of your debts are capped at 4% of the home's value. For Hampton Roads military buyers, that structure can significantly reduce cash to close. Learn more in my guide to VA loans in Hampton Roads.
Conventional Seller Concessions
Conventional limits depend on your down payment and how you'll use the home. With 10% or less down on a primary residence, the typical limit is 3%. Between more than 10% and less than 25% down, it's typically 6%. With 25% or more down, it can reach 9%. Investment properties are typically limited to 2%. My guide to conventional loans covers the program overall.
USDA Seller Concessions
USDA loans generally allow seller contributions up to 6% of the sales price toward closing costs. Combined with USDA's no-down-payment option in eligible areas, that can make buying possible with very little cash. See my guide to USDA loans in Hampton Roads.
You Can't Get Back More Than Your Costs
No matter the limit, concessions can only cover actual closing costs and allowed items. If you negotiate a 3% credit but your costs are only 2.5%, the extra usually can't be paid to you in cash. Know your estimated costs first. My Virginia closing costs calculator and guide to buyer closing costs in Virginia can help.
Using Concessions in an Offer
Asking for concessions is a negotiation. In a slower market, sellers may agree readily. In a competitive one, a large request can make your offer less attractive, and some buyers offer a slightly higher price to cover the credit, which only works if the home appraises at that price. I'll help you decide how much to ask for and how to structure it. My guide on how to lower closing costs as a buyer covers other strategies, and if you're short on cash, see closing cost assistance in Virginia.
Ready to plan your purchase? Learn how I work 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.
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