A seller concession (or seller credit) is money the seller agrees to put toward your closing costs. Lenders cap it. The cap depends on your loan program, how the home will be used and, for conventional loans, how much you put down. Lenders call these payments interested party contributions, because the seller has a stake in the sale going through.
The limits by loan type
| Loan | Limit | Percent of |
|---|---|---|
| Conventional (Fannie Mae), primary or second home, LTV over 90% | 3% | Lower of price or appraised value |
| Conventional (Fannie Mae), primary or second home, LTV 75.01–90% | 6% | Lower of price or appraised value |
| Conventional (Fannie Mae), primary or second home, LTV 75% or less | 9% | Lower of price or appraised value |
| Conventional (Fannie Mae), investment property, any LTV | 2% | Lower of price or appraised value |
| FHA | 6% | Sales price |
| USDA Guaranteed | 6% | Sales price |
| VA | Ask your lender | Not calculated here (VA sets its own rules) |
How the calculator works
- Find the value. Fannie Mae uses the lower of the sales price or appraised value, not the loan amount. FHA and USDA use the sales price.
- Find the percentage. For conventional loans, we divide your loan amount by that value to get the LTV and pick the tier. FHA and USDA are a flat 6%.
- Cap at your real costs. A credit can only cover actual closing costs and prepaids (such as escrow deposits for taxes and insurance). Anything above that is not a closing cost credit.
- Compare with your request. If you ask for more than the maximum, the excess shows in red.
Worked example
You agree to buy a primary home for $500,000 with 10% down, so the loan is $450,000. The appraisal comes in at $495,000. Your Loan Estimate shows $18,000 of closing costs and prepaids, and you ask the seller for $15,000.
- Fannie Mae uses the lower value, $495,000. LTV = $450,000 ÷ $495,000 = 90.91%.
- That is over 90%, so the limit is 3%: 3% × $495,000 = $14,850.
- Your $15,000 request is $150 over. Lower it to $14,850, or treat the $150 as a price cut.
- With an FHA loan, 6% of $500,000 is $30,000, but your costs are only $18,000, so the most you could use is $18,000.
Rules to know
- Not for your down payment. Fannie Mae says these contributions can't be used for the down payment, reserves or your minimum contribution.
- Commissions. HUD does not count seller-paid real estate commissions that are customary in the area toward the FHA 6% limit. USDA has proposed writing a similar exclusion into its rules.
- HOA dues. Fannie Mae lets the credit cover your HOA assessments for up to 12 months after closing.
- Your lender has the final word. These are agency maximums. Confirm the number before you sign the contract.
Next steps
Get a full cost estimate with the closing cost calculator (or the NYC version), then check the final credit on your Closing Disclosure. If you're choosing a program, compare the FHA, VA and USDA calculators.