Seller concessions are closing-cost credits a seller agrees to pay on the buyer’s behalf. Instead of covering every fee yourself, you negotiate for the seller to pick up part of your closing costs and prepaid expenses, which lowers the cash you bring to the table. You’ll sometimes hear them called seller-paid closing costs or, in loan-guideline language, interested party contributions. How much you can get is capped by your loan type, and the credit can never exceed your actual closing costs.
What Seller Concessions Can Cover
A concession can go toward most of the one-time costs of getting a loan and closing a purchase. Common examples:
- Loan origination, underwriting, and processing fees
- Appraisal and home inspection fees
- Title insurance and escrow or settlement fees
- Recording fees and transfer taxes
- Discount points and the cost of a temporary rate buydown or permanent rate buydown
- Prepaid items like property taxes, homeowners insurance, and prepaid interest
What a concession can’t touch is your down payment. It only offsets closing costs and prepaids; it never reduces the down payment itself, nor does it come back to you as cash.
A related option is repair credits, where the seller credits the buyer for specific repair costs rather than general closing costs.
Seller Concession Limits by Loan Type
How much a seller can contribute depends on your loan program, and for conventional loans, on your down payment. These caps come from Fannie Mae, Freddie Mac, FHA, VA, and USDA guidelines. Fannie Mae’s interested-party-contribution limits set the conventional figures below.
| Loan type | Down payment | Concession limit |
|---|---|---|
| Conventional (primary or second home) | Less than 10% down | 3% of price |
| Conventional | 10% to 24.99% down | 6% of price |
| Conventional | 25% or more down | 9% of price |
| Conventional (investment) | Any | 2% of price |
| FHA | Any | 6% of price |
| VA | Any | 4% of price, plus customary closing costs |
| USDA | Any | 6% of price |
| Jumbo | Varies | Set by the investor, often lower (commonly 2% to 3%) |
Buyers using an FHA loan can receive up to 6% of the purchase price in seller concessions.
Two rules apply across every program. A concession can’t exceed your actual closing costs, so if you negotiate more than you owe, the extra is wasted rather than paid to you. And the figures above are financing concessions; customary costs that a seller pays under local practice can fall outside the cap. Confirm the exact limit and what counts with your lender before you write the offer.
When a Concession Becomes a Sales Concession
There’s a technical line worth knowing. If a credit exceeds your program’s cap, or takes the form of a non-realty giveaway, such as cash, furniture, or moving costs, guidelines treat the excess as a sales concession. The lender then subtracts that amount from the sale price and recalculates your loan-to-value using the lower number. Going over the limit doesn’t get you more help. It lowers the value your loan is based on, which is why the credit is structured to stay within both the program cap and your actual total closing costs.
How Seller Concessions Work in an Offer
A concession is negotiated as part of your offer and written into the purchase contract. Say a home is listed at $300,000 and you ask for $5,000 toward closing costs. In a softer market, a seller might agree and simply net $5,000 less at closing. In a tighter market, a seller might agree only if the price rises to $305,000 to offset the credit, which leaves you with a slightly larger loan.
Either way, the appraisal has to support the price. If a seller raises the price to fund a large concession and the home doesn’t appraise at the higher price, you’d have to cover the gap in cash, which would cancel out part of the benefit. Sizing the concession to your actual closing costs keeps that from happening.
Pros and Cons for Buyers
For buyers, the appeal is cash flow at closing. A concession can free up several thousand dollars you’d otherwise spend on fees, leaving more for moving or repairs. The trade-offs show up when the price is raised to fund the credit, since that means a larger loan and a slightly higher payment, and when a large concession triggers a low appraisal. When sized correctly, a concession is one of the cleaner ways to lower your upfront cost without changing your rate or down payment.
Another way to reduce upfront costs is through lender credits, which work differently but serve a similar purpose.
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July 23, 2026
Frequently Asked Questions
What does “seller concessions” mean?
Seller concessions are credits a seller agrees to pay toward the buyer’s closing costs and prepaid expenses. They lower the cash a buyer needs at closing but do not reduce the down payment, and they can’t be taken as cash back.
Are seller concessions the same as sales concessions?
In everyday use, people use the terms interchangeably. In loan guidelines, they differ: financing concessions within the limits cover closing costs, while a “sales concession” is an amount over the limit or a non-realty giveaway, which gets deducted from the sale price when the lender calculates loan-to-value.
Can seller concessions be used for the down payment?
No. Under every loan program, concessions can only go toward closing costs and prepaid expenses, never the down payment. Gift funds are a separate option for the down payment, which your lender can walk you through.
How much can a seller contribute?
It depends on the loan. Conventional limits range from 3% to 9% of the price based on your down payment (2% on investment properties); FHA and USDA allow up to 6%; and VA allows 4% of the price plus customary closing costs. Jumbo limits are set by the investor and are often lower.
Do large seller concessions affect the appraisal?
They can. Appraisers review the contract, and if the purchase price appears inflated to justify a large concession, the appraised value may come in below the price. That would leave the buyer covering the difference in cash.
Plan Your Offer Around the Right Concession
Seller concessions can take a real bite out of your closing costs, as long as they stay within your loan’s limits and your total cost. The move is to size the credit correctly and confirm the cap for your program before the offer goes in.
For more on the homebuying process, see the CFPB’s homebuying guide.
For a broader look at the types of concessions and how to negotiate them, see our guide to real estate concessions.
Have a purchase in mind and want to know how much a seller can contribute to your loan? Reach out to JVM Lending to get pre-approved and plan your offer.
