Seller concessions are credits from the seller toward your closing costs — not your down payment. Here’s what they cover, the limits, and how to ask for them.
I explain the buydown math in Should You Pay Points to Buy Down Your Rate — or Wait? — and this post is the other half of that conversation: where the money for the buydown actually comes from. I break it down in Episode 28, and here is the plain-English version.
What a seller concession actually is
A seller concession — also called a seller credit — is money the seller agrees to pay toward your closing costs. It is not a discount on the price. It is a credit at closing, applied to the costs you would otherwise pay out of pocket: lender fees, title and escrow fees (escrow is the neutral account that holds the money until closing), prepaid insurance and the money set aside for property taxes, and — most usefully — a rate buydown.
On a $700,000 house, a 2% seller credit is $14,000. That is real money. It can cover most of your closing costs, or buy your rate down. A point costs 1% of your loan — about $6,873 on a $700,000 FHA loan — and saves about $115 a month, so a $14,000 credit can cover roughly two points. Same credit, different use — and the buydown is usually the better one.
What seller concessions can cover
Closing costs run 2–5% of the price on a $700,000 house — $14,000 to $35,000. A seller credit can cover lender fees, title and escrow fees, prepaid insurance and tax escrow, and rate buydowns. It cannot cover your down payment. That is the line. The seller can pay your closing costs. They cannot pay your down payment. Your down payment has to come from you, from a gift, or from down payment assistance.
Seller credits also pair with down payment assistance. The Empowered 3.5% program gives you 2% or 3.5% toward down payment or closing costs as a grant forgiven after six months — and you can still ask the seller for a credit on top of that. The two stack. That’s how buyers close with very little cash out of pocket.
The limits — and why they exist
Seller concessions are capped by loan type. The caps exist because the lender does not want the seller inflating the price to cover the credit — if the seller gives you $42,000 and raises the price by $42,000, the lender is financing a price that is not real. So the caps:
- FHA: up to 6% of the price — $42,000 on a $700,000 house (HUD Handbook 4000.1).
- Conventional: 3% if you put less than 10% down, 6% if you put 10–25% down, 9% if you put 25% or more down (Fannie Mae B3-4.1-02). On a $700,000 house, that 3% cap is $21,000. (Careful: that’s 3% of the price — the concession cap — not your down payment. Two different 3%s, and mixing them up is how buyers misread this whole section.)
- VA: up to 4% of the price in seller concessions — $28,000 on a $700,000 house (VA Pamphlet 26-7). Don’t mix the two VA numbers up: the 4% above caps concessions — the extras a seller agrees to pay for you. VA separately limits the other costs a seller can pay on your loan, with its own 4% ceiling.
Anything above the cap has to come out of the price — the seller lowers the price instead of giving you a credit. That is still a win, just a different one. A price cut saves you about $45 a month on a $700,000 house. A buydown saves $115 a month. Same $6,873, more than twice the monthly savings — which is why I always check the buydown first.
When sellers actually say yes
Sellers say yes to concessions when the market lets you ask. A home that has been sitting for 30+ days, a seller who needs to move, a buyer’s market, a home with an issue the inspection found — those are the moments to ask. In a hot market with multiple offers, asking for a large credit can cost you the house. Your agent reads the situation and tells you how much to ask for.
How to ask for it in the offer
- Know your real closing costs first. Run your numbers in the Mortgage Payment Calculator and ask your lender for the full estimate. Don’t ask for a round number — ask for the number that covers your actual costs.
- Put the credit in the offer. Your agent writes it into the purchase contract as a seller credit toward closing costs. It is a term of the offer, like the price — and the seller can accept it, counter it, or reject it.
- Get the buydown quoted. Before you accept a credit, ask your lender what it buys: a price cut, or a rate buydown? Get both numbers. The buydown usually wins.
My Take
Don’t leave money on the table. Ask for the credit when the market lets you — and know your real closing costs before you ask.
What to do with this
- Run the payment on your price in the Mortgage Payment Calculator — full payment, tax and insurance included.
- Read Should You Pay Points to Buy Down Your Rate — or Wait? for the 60-month buydown test.
- Read The Hidden Costs and Fees of Buying a Home for the full closing-cost breakdown.
- Then start your pre-approval and I’ll tell you what a seller credit could cover on your deal.
Hear me talk through seller concessions on the podcast in Episode 28: listen here.
Seller concession limits: FHA 6% (HUD Handbook 4000.1), conventional 3–9% (Fannie Mae B3-4.1-02), VA 4% (VA Pamphlet 26-7), verified November 8, 2026. This is education, not a rate quote or a loan approval. Dat Nguyen, Certified Mortgage Advisor, NMLS 1379110.