Seller Concession Cheat Sheet

Seller concessions are one of the most useful tools in a purchase transaction — but they must be structured correctly.

A properly written seller credit can help buyers:

• Reduce cash to close
• Cover closing costs
• Buy down the interest rate
• Strengthen affordability

This guide explains the basics and the most common mistakes that cause underwriting or contract issues.

A seller concession (also called a seller credit) is when the seller agrees to contribute money toward the buyer’s closing costs.

It can be used for:

• Lender fees
• Title fees
• Prepaid taxes and insurance
• Interest rate buydowns
• Other allowable closing costs

It cannot typically be used for:

• Down payment
• Cash back to the buyer
• Non-allowable personal expenses

Seller concessions are often the difference between:

• A buyer being able to close comfortably
• A buyer being short on cash at closing

They’re especially common in:

• FHA transactions
• First-time homebuyer deals
• Negotiated repair situations
• Slower market conditions

This is where many contracts get written incorrectly.

Conventional Loans

Maximum seller concession depends on down payment:

• <10% down: up to 3%
• 10-24.99%: up to 6%
• 25%+ down: up to 9%
• Investment property: usually capped at 2%

FHA allows seller concessions up to:

• 6% of the purchase price

This is one of FHA’s biggest benefits for first-time buyers.

VA loans are very flexible.

The seller can contribute:

• Up to 4% in seller concessions toward certain costs
• Plus additional normal closing costs in many cases

VA guidelines are nuanced — structure matters.

USDA generally allows:

• Up to 6% seller concessions

1. Writing Too High A Credit 

If the contract exceeds the program limit:

• Contract must be amended
• Disclosures must be re-issued
• Timeline may shift

Always confirm limits before finalizing.

Credits should be written clearly, for example:

“Seller to contribute up to $10,000 toward buyer’s allowable closing costs and prepaid items.”

Avoid vague language like:

“Seller to pay buyer’s costs.”

If repairs are needed, sometimes a credit is cleaner.

But lender rules apply.

Credits must still fall within program limits.

The buyer cannot receive cash back.

If closing costs are lower than expected, unused credits may be lost.

Structure the credit carefully.

Before writing concessions, confirm:

• Loan type (Conventional/FHA/VA)
• Down payment percentage
• Estimated closing costs
• Any buydown strategy
• Program-specific limits

Clean structure upfront prevents last-minute amendments.

Seller concessions are especially helpful for:

• First-time buyers with limited cash
• VA buyers strengthening affordability
• Negotiating repairs without contractors
• Rate buydowns instead of price cuts

If you’re writing an offer and want to confirm the seller credit is allowable and clean, I’m happy to review it quickly.

Tyler Krug
Mortgage Broker | 210 Mortgage
San Antonio, Texas

📞 210-204-8249
🌐 www.210mortgage.com

Offer Package Checklist

Cash to Close Breakdown

FHA Loans San Antonio

VA Loans San Antonio

Mortgage Broker San Antonio