What Are Seller Concessions, and How Much Can a Seller Pay?

Seller concessions are money the seller agrees to put toward your closing costs, written into the purchase contract. They exist because buyers and sellers are short of different things: a buyer scraping together a down payment is short on cash, while a seller mostly cares about the headline price. A concession moves the deal's money around so both sides get the thing they're watching. How much is allowed isn't up to the seller's generosity — every loan program caps it, and the caps are worth knowing before you negotiate.

The caps, by loan type

• Conventional loans — capped by down payment, per Fannie Mae's Selling Guide: less than 10% down allows 3% of the price, 10% to 25% down allows 6%, and over 25% down allows 9%. (Investment properties: 2%, regardless.)
• FHA loans — 6% of the sales price, per HUD Handbook 4000.1. Go over and the excess is treated as an inducement to purchase: it's subtracted, dollar for dollar, from the value used to size your loan.
• VA loans — the split surprises people: VA doesn't limit what a seller pays toward ordinary closing costs, but caps concessions — extras like prepaids, the funding fee, or paying off your debts — at 4% of the home's value.

A worked example

Buy a $350,000 home with 10% down on a conventional loan and the cap is 6% — up to $21,000, far more than most buyers need. The realistic ask is your actual bill: say closing costs of $9,000, the figure from our closing costs article. Without help, closing day needs $35,000 down plus $9,000 in costs — $44,000. With a $9,000 concession, it needs $35,000. Even at 5% down, where the cap drops to 3% ($10,500), the same $9,000 request fits. One boundary to know: concessions can only cover what you actually owe — closing costs and prepaids. There's no negotiating a surplus into cash back at the table.

What a concession really is — the honest version

Sellers read net proceeds, not sticker prices, so in most negotiations a concession is a price move in disguise: $359,000 with $9,000 back nets the seller about the same as $350,000 clean. Take that deal with 10% down and the higher price adds $8,100 to your loan and $900 to your down payment. You haven't been given $9,000 — you've financed your closing costs over 30 years. That's not automatically bad. The same trade priced in our closing costs article — $9,000 rolled into a $315,000 loan at 6.5% — costs about $57 a month and roughly $11,500 in interest over the full term, and if the alternative is emptying your emergency fund in the month you become responsible for a furnace, financing the fees can be the sane choice. But make it knowingly: run the payment at both prices through the mortgage calculator before you sign, and check the bigger loan still fits your income with the affordability calculator. Two more practical limits: the home must appraise at the higher price for the trick to work at all, and in a hot market a concession-heavy offer simply loses to a clean one.

When to ask

Concessions get cheap when time is on your side: listings that have sat, price cuts already taken, slow seasons, motivated sellers. New-construction builders are the other big source — they'd rather pay your costs than cut a comp-setting price — but builder credits usually require using the builder's lender, so compare that lender's rate against an outside quote before counting the credit as free money. And if the deposit side of the contract is on your mind too, that's a different lever: earnest money moves your cash earlier, while concessions move the seller's cash toward your costs.

A concession rarely changes what the seller nets — it changes when you pay. Less cash at the table, more payment for thirty years. Sometimes that's exactly the trade you need; just don't call it a discount.

Common questions

Do seller concessions lower the price I'm paying?

Usually the opposite — the concession is baked into a higher contract price. What they genuinely lower is the cash you need on closing day, which for many buyers is the binding constraint.

Can I get extra concession money back as cash?

No. Concessions are capped at your actual closing costs and prepaids — a concession bigger than your bill is simply wasted, so size the ask to the Loan Estimate, not to the program cap.

What happens if a concession exceeds the program's cap?

The lender won't fund it as written. On conventional loans the excess gets treated as a price reduction for loan-sizing purposes; on FHA loans it's deducted from the value used to size your loan, dollar for dollar. In practice your lender flags it and the contract gets rewritten — one more reason to know the cap before negotiating.

This article is general information, not personalized financial advice. How we write and review articles is covered in the editorial note on our About page.