How much can the seller pay toward my closing costs?

What seller concessions are

A seller concession, or seller credit, is money the seller agrees to put toward your closing costs. It reduces the cash you bring to closing without changing your down payment. Each loan program limits how much the seller can contribute, based on the price and, for conventional loans, your down payment.

The limits

• Conventional (home you’ll live in or second home): 3% of the price with less than 10% down, 6% with 10% to 25% down, and 9% with 25% or more.
• Conventional investment property: 2%.
• FHA and USDA: 6%.
• VA: 4% of the home’s value for concessions, but the seller can also pay your normal closing costs and discount points on top of that.

A credit also can’t be larger than your actual closing costs and prepaid items. Any amount over that is lost or must be removed.

An example

On a $450,000 home with 5% down and a conventional loan, the seller can credit up to $13,500 (3%). If your closing costs and prepaids are about that much, the credit could cover them entirely.

Using a credit in your offer

You can ask for a credit at the listing price, or raise your offer by the credit amount so the seller nets the same. The second approach only works if the home appraises at the higher price. In slower markets, sellers often prefer a credit to a price cut; in competitive markets, asking for one can weaken your offer.

Writing it into the contract

The credit must be in the purchase contract, usually as a dollar amount “toward buyer’s closing costs and prepaid items.” Tell your lender early so the Loan Estimate reflects it. If the inspection turns up repairs, a further credit is possible, but the total still has to fit within your loan’s limit and your actual costs.

Questions buyers ask