How Much Can a Seller Pay Toward Your Closing Costs? A Guide to Seller Concession Limits

A seller concession can lower your out-of-pocket costs at closing. But your loan program sets a hard cap on how much a seller can contribute. That cap depends on your loan type, your down payment, and your home’s price. Here’s a breakdown by loan program, so you know exactly what to ask for before you write an offer.

What Is a Seller Concession?

A seller concession is money the seller credits toward your closing costs, prepaid items, or discount points. It is not a price reduction. The seller effectively pays part of your fees at the closing table. The listing price stays the same, but your bill at closing gets smaller.

Your loan program sets the concession cap as a percentage of the purchase price. A smaller down payment usually means a smaller allowed concession. Lenders see a bigger down payment as lower risk, so they allow a bigger concession in return. Concessions never apply toward your down payment — only to closing costs. Bring this up during offer strategy. Don’t wait to discover it later.

Conventional Loan Concession Limits

For a primary or secondary home financed with a Conventional loan, the maximum seller contribution scales with your down payment: 3% of the purchase price if you’re putting down less than 10%, 6% if your down payment is between 10–25%, and 9% if you’re putting down more than 25%. On a $700,000 home, for example, that ranges from $21,000 up to $63,000 depending on your down payment tier.

If the home is being purchased as an investment property rather than a primary or secondary residence, the limit drops to 2% of the purchase price with at least 15% down, regardless of how much more you put down beyond that. Investment buyers should factor this lower ceiling into their negotiation strategy from the start, since it meaningfully changes how much cushion a seller can realistically offer.

FHA, VA & USDA Concession Limits

Government-backed loans have their own rules. FHA loans on a primary residence allow up to 6% of the purchase price toward closing costs, prepaid items, and discount points, as long as the buyer puts down at least 3.5%. USDA loans, which require no down payment, also allow up to 6% — though USDA figures should always be treated as estimates and confirmed before closing.

VA loans offer the most flexibility: closing costs, prepaid items, and up to two discount points can be covered by the seller with no stated limit. However, if the concession also covers the VA funding fee, additional discount points beyond two, or payoff of the buyer’s other debts, that portion is capped at 4% of the purchase price. On an $800,000 home, that 4% cap works out to $32,000 — on top of the unlimited coverage for standard closing costs and prepaids.

Why This Matters More as Price Climbs

Because concession limits are calculated as a percentage of purchase price, the dollar amount a seller can contribute grows substantially in higher price brackets. A 6% FHA concession is $30,000 on a $500,000 home, but $60,000 on a $1,000,000 home — double the cushion for buyer closing costs, rate buydowns, or prepaid escrow items.

This is exactly why concession strategy should be part of every offer conversation, especially in a market where sellers may be more willing to negotiate. Knowing your loan program’s real ceiling — not just a rough guess — lets you and your agent ask for a number that’s actually achievable, rather than leaving money on the table or requesting more than the guidelines allow.

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Frequently Asked Questions

1. Can a seller concession be used for my down payment?

No. Concessions can only be applied to closing costs, prepaid items, or discount points — never toward the down payment itself.

2. What happens if the seller offers more than my loan program allows?

Lenders cap concessions at the limit shown above. Any amount offered above that cap is simply not applied — it doesn’t carry over or reduce your down payment.

3. Do these limits change based on the home’s price?

The percentage stays the same within a loan program, but since it’s calculated as a percentage of purchase price, the dollar amount rises with the price — a 6% FHA concession is worth far more on an $800,000 home than a $500,000 one.

4. Are VA concessions really unlimited?

Closing costs, prepaids, and up to two discount points have no cap for VA buyers. Only the funding fee, extra discount points, and debt payoff fall under the separate 4% limit.

5. Should I ask for a concession or a price reduction?

It depends on your loan type, rate, and cash-on-hand needs — this is exactly the kind of trade-off your agent should walk through with you before you write an offer.

Disclaimer

All figures, percentages, and dollar amounts in this article are estimates for general educational purposes only and are based on commonly used lender guidelines as of publication. Seller concession limits, loan program requirements, and USDA eligibility can vary by lender, loan investor, and county, and are subject to change without notice. This article does not constitute financial, mortgage, or legal advice. Buyers should confirm exact concession limits and final closing figures with their licensed lender and title company prior to making an offer or closing on a home.