As of 2026, conventional loans allow a maximum seller concession of up to 9% of the home’s sale price when the buyer puts down 25% or more; the cap drops to 6% for down payments between 10% and 24%, and to 3% when the down payment is less than 10% Consumer Financial Protection Bureau.
What is the maximum seller concession on a 95% LTV FHA loan?
FHA permits seller concessions up to 6% of the sales price on all FHA loans, including 95% LTV loans U.S. Department of Housing and Urban Development.
These concessions cover closing costs, prepaid expenses, discount points, and other financing costs. Honestly, this is the most flexible option for buyers with limited cash. They can’t be used for the down payment or as cash back to the buyer, though. Typically, the concession is applied by increasing the home’s sale price to include the seller’s contribution. If you're exploring other financing options, you might also want to learn about seller financing.
What is FHA’s maximum allowable seller’s concessions?
FHA loans cap seller concessions at 6% of the home’s sale price as of 2026 U.S. Department of Housing and Urban Development.
This limit applies no matter the loan-to-value (LTV) ratio. While FHA loans are more flexible than some other loan types, sellers can’t exceed this 6% threshold. If you’re using an FHA loan, confirm this limit with your lender—it’s a fixed rule from the Federal Housing Administration. For more details on seller obligations, check out what happens if a seller does not disclose.
What is seller concession amount?
A seller concession is a dollar amount the seller agrees to contribute toward the buyer’s closing costs.
For example, on a $300,000 home purchase, a 3% seller concession equals $9,000 applied to closing costs like origination fees, title insurance, or prepaid taxes. The concession is negotiated during the purchase agreement and doesn’t reduce the home’s sale price or provide cash to the buyer at closing. If you're curious about how concessions might impact your taxes, read about what taxes do sellers pay at closing.
How much does FHA allow for seller concessions?
FHA allows up to 6% of the home’s sale price in seller concessions to cover closing costs and prepaid items U.S. Department of Housing and Urban Development.
This 6% cap includes all financing concessions, such as discount points or buydown costs, but can’t be used for the down payment. If you’re buying with an FHA loan, your lender will confirm this limit during underwriting. To better understand seller responsibilities, see does sellers agents repair homes before sale.
Can a seller give a buyer cash after closing?
Sellers can reimburse the buyer for documented repairs discovered after the purchase agreement but before closing.
This practice—sometimes called a “repair credit”—must be clearly stated in the purchase agreement. It can’t be used for new upgrades or unrelated expenses. Always document the repair and agree to the credit in writing before closing. (In my experience, this is most common when a home inspection reveals unexpected issues just before closing.) If you're worried about scams, learn how to spot how do you know if a seller is scamming you on eBay.
How do you calculate seller’s concessions?
Calculate seller concessions by applying the allowed percentage to the lower of the home’s sale price or appraised value.
For example, if the home sells for $350,000 and appraises for $345,000, the maximum concession is based on $345,000. A 6% concession on a conventional loan with 10% down would be $20,700. Always confirm the allowable percentage with your lender before finalizing the contract. For more on concession terms, visit what are concessionary terms.
Do sellers like USDA loans?
USDA loans often receive favorable treatment from sellers because they allow up to 6% in seller concessions, which is higher than conventional loans for buyers with smaller down payments.
Sellers appreciate USDA loans because they expand the pool of eligible buyers, especially in rural areas. Since USDA loans don’t require a down payment, buyers may qualify even if they have limited savings, making the offer more attractive to sellers. I’ve found that in rural markets, sellers often see USDA-backed offers as more reliable than conventional ones with small down payments. To understand how concessions relate to down payments, check out can you use seller concessions down payment.
Do sellers have to pay closing costs?
Sellers do not have to pay all closing costs, but they are typically responsible for certain fees like transfer taxes, title insurance, and real estate commissions.
While buyers usually pay the majority of closing costs, sellers cover local transfer taxes, municipal fees, and their agent’s commission. The specific split varies by state and contract terms. In competitive markets, sellers may agree to concessions to help the buyer close the deal. Learn more about concession roles in what is a concession person.
Can a seller pay the downpayment on a FHA loan?
No, FHA loans prohibit sellers from paying the borrower’s down payment, including through gift funds or concessions U.S. Department of Housing and Urban Development.
FHA rules require the borrower to use their own funds for the 3.5% minimum down payment. The seller can contribute up to 6% toward closing costs, but not toward the down payment. Lenders verify the source of all funds during underwriting to ensure compliance. For details on travel concessions, see can you use concessionary travel pass on trains.
What can a seller concession be used for?
Seller concessions can only be used to reduce the buyer’s closing costs, such as origination fees, appraisal costs, and title insurance.
They can’t be applied to the down payment, used as cash back to the buyer, or cover unrelated expenses like renovations. The funds are disbursed at closing and applied directly to approved closing costs listed on the Closing Disclosure. For more on job-related concessions, visit what does concession job mean.
Why would a seller pay closing costs?
Sellers may agree to pay closing costs to make the home more affordable or attractive to buyers, especially in a slower market.
For example, offering a 3% concession on a $300,000 home saves the buyer $9,000 in out-of-pocket expenses. This strategy can help close a sale faster or allow the seller to negotiate a higher sale price. I’ve seen this work particularly well in markets where inventory is high and sellers need to stand out.
What is included in seller concessions?
Seller concessions typically include loan origination fees, appraisal fees, title insurance, transfer taxes, and prepaid property taxes or insurance.
Other eligible items may include mortgage discount points, attorney fees, or inspection costs, depending on the lender and loan type. The exact list is outlined in the purchase agreement and confirmed on the Closing Disclosure. Not all fees are eligible; your lender will provide a detailed list.
Is an FHA loan bad for the seller?
Some sellers view FHA loans as riskier because of stricter appraisal requirements and perceptions about borrower qualifications
FHA appraisers look for health and safety issues like peeling paint, missing handrails, or faulty wiring, which could delay or derail the sale U.S. Department of Housing and Urban Development. Additionally, some sellers assume FHA buyers are less financially stable, though this isn’t always true. These perceptions vary by market and individual seller priorities.
Why do sellers not want FHA loans?
Sellers often avoid FHA loans due to stricter appraisal guidelines and potential delays caused by required repairs.
Here’s the thing: the FHA appraisal focuses on health, safety, and habitability, which can uncover issues that conventional appraisals might overlook. If repairs are needed, the seller may have to fix them or renegotiate the price, adding time and cost to the transaction. In competitive markets, sellers may prefer conventional loans to avoid these complications.
Who pays the closing costs on an FHA loan?
While the buyer is typically responsible for most closing costs on an FHA loan, seller concessions can cover up to 6% of these costs.
The buyer may still need to bring some funds to closing, but the use of seller concessions can significantly reduce the out-of-pocket expense. Common costs include the FHA upfront mortgage insurance premium, appraisal fee, and title insurance. Your lender will provide a detailed breakdown on the Loan Estimate and Closing Disclosure.
