On a conventional loan, the maximum seller concession is 3% with less than 10% down, 6% with 10% to under 25% down, and 9% with 25% or more down for a primary residence or second home. Investment properties are capped at 2% at all down payment levels.
Conventional Loan Limits
- Less than 10% down: Maximum seller concession is 3% of the lesser of the sale price or appraised value, per the Freddie Mac Seller/Servicer Guide effective July 1, 2026.
- 10% to under 25% down: Maximum seller concession is 6%.
- 25% or more down: Maximum seller concession is 9%.
- Investment property: Maximum seller concession is 2% at all down payment levels.
FHA and VA Limits
- FHA: Interested parties may contribute up to 6% of the sale price toward closing costs, prepaids, and discount points, per HUD Handbook 4000.1.
- VA: Seller concessions are limited to 4% of the home’s reasonable value as determined by the VA Notice of Value. The seller can pay certain closing costs such as origination fees, discount points, and appraisal fees separately from the 4% cap.
What Seller Concessions Cover
- Eligible costs: Closing costs, prepaid items like insurance and tax escrow, discount points to buy down your interest rate, and the FHA upfront mortgage insurance premium.
- Not eligible on conventional: Down payment, minimum borrower contribution, or financial reserves. On FHA, contributions may not be used for the borrower’s minimum required investment.
- If the credit exceeds your costs: On a conventional loan, the excess is treated as a sales concession and may require a reduction to the sale price for underwriting.
Rates Right Now
- 30-year fixed: 7.28% as of the week of October 1, 2026, per the Freddie Mac Primary Mortgage Market Survey. Up from 6.34% a year ago.
- 15-year fixed: 6.60% for the same week.
- Why this matters for concessions: At current rates, a seller-funded rate buydown using discount points can reduce your monthly payment. The rate reduction per point varies by lender and market, per the CFPB.
Can seller concessions be used for a down payment?
No. On conventional loans, financing concessions may only be used to pay borrower closing costs and up to 12 months of HOA dues, per the Freddie Mac Seller/Servicer Guide. On FHA loans, contributions may not be used for the borrower’s minimum required investment, per HUD Handbook 4000.1.
What is the max seller concession on a conventional loan with 5% down?
With 5% down on a conventional loan, your LTV is above 90%, so the maximum seller concession is 3% of the lesser of the sale price or appraised value. On a $300,000 home, that means the seller can contribute up to $9,000 toward your closing costs.
What is the max seller concession for FHA loans in 2026?
FHA caps interested party contributions at 6% of the sale price. On a $325,000 home, that is up to $19,500 toward origination fees, closing costs, prepaids, discount points, and the upfront mortgage insurance premium. Contributions exceeding 6% or exceeding your actual costs are treated as inducements to purchase and trigger a dollar-for-dollar reduction to the sale price for underwriting, per HUD Handbook 4000.1.
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The Bottom Line Up Front
Seller concessions are capped by your loan program and your down payment. On a conventional loan, the limit is 3%, 6%, or 9% depending on how much you put down. FHA allows up to 6%. VA allows 4% in concessions, and the seller can pay certain closing costs separately. On conventional loans, financing concessions may only be used to pay borrower closing costs and up to 12 months of HOA dues, per the Freddie Mac Seller/Servicer Guide. On FHA loans, contributions may not be used for the borrower’s minimum required investment, per HUD Handbook 4000.1.
Conventional Seller Concession Limits by Down Payment
On a conventional loan backed by Freddie Mac, the maximum seller concession depends on your occupancy type and loan-to-value ratio. The percentage is calculated on the lesser of the sale price or the appraised value.
| Occupancy | Down payment | LTV | Max seller concession |
|---|---|---|---|
| Primary residence or second home | Less than 10% | Above 90% | 3% |
| Primary residence or second home | 10% to under 25% | Above 75% to 90% | 6% |
| Primary residence or second home | 25% or more | 75% or less | 9% |
| Investment property | Any | Any | 2% |
Source: Freddie Mac Single-Family Seller/Servicer Guide, Section 5501.6, effective July 1, 2026.
- What counts as a financing concession: Seller contributions that go toward your closing costs and up to 12 months of prepaid HOA dues collected and disbursed at closing.
- What does not count against the limit: Lender credits derived from premium pricing, prorated real estate tax credits in areas where taxes are paid in arrears, and builder forward commitment costs obtained before the purchase contract.
- If the concession exceeds the limit: The excess is classified as a sales concession. On a manually underwritten loan, the dollar amount of the sales concession is deducted from the purchase price before calculating LTV, which can reduce how much you can borrow.
Conventional Seller Concession Examples
These examples assume the appraised value equals the sale price. If the appraised value is below the sale price, the concession percentage is based on the appraised value.
| Purchase price | Down payment | Down payment amount | Max % | Max seller concession |
|---|---|---|---|---|
| $300,000 | 5% | $15,000 | 3% | $9,000 |
| $400,000 | 10% | $40,000 | 6% | $24,000 |
| $500,000 | 20% | $100,000 | 6% | $30,000 |
| $600,000 | 25% | $150,000 | 9% | $54,000 |
| $350,000 investment | Any | Varies | 2% | $7,000 |
The credit cannot exceed the program cap. On a conventional loan, financing concessions may only be used to pay borrower closing costs and up to 12 months of HOA dues per the Freddie Mac Seller/Servicer Guide.
What Seller Concessions Can and Cannot Cover
- Eligible on conventional loans: Your closing costs and up to 12 months of HOA dues collected and disbursed at closing, per the Freddie Mac Seller/Servicer Guide.
- Eligible on FHA loans: Origination fees, closing costs including items paid outside closing, prepaid items, discount points, permanent and temporary interest rate buydowns, mortgage interest payments, mortgage payment protection insurance, and the upfront mortgage insurance premium.
- Eligible on VA loans: The seller can pay closing costs such as origination fees, discount points, appraisal fees, title insurance, and recording fees. Those closing costs are not counted against the 4% concession cap. Items counted against the 4% include credits toward the VA funding fee, debt payoff, and prepayment of the buyer’s hazard insurance and property taxes.
- Not eligible on conventional: Down payment, minimum borrower contribution, or financial reserves. On FHA, contributions may not be used for the borrower’s minimum required investment.
Can Seller Concessions Be Used for a Down Payment
No. Each loan program specifies how concessions may be used.
- Conventional: The Freddie Mac Seller/Servicer Guide states that financing concessions may only be used to pay borrower closing costs and up to 12 months of HOA dues. Concessions “must not” be used for the down payment, financial reserves, or minimum borrower contribution requirements.
- FHA: HUD Handbook 4000.1 states that interested party contributions “may not be used for the Borrower’s minimum required investment.”
What Happens If the Seller Concession Exceeds the Limit
- Conventional loans: Contributions above the financing concession limit are reclassified as sales concessions. For manually underwritten loans, the dollar amount is deducted from the purchase price before calculating LTV.
- FHA loans: Contributions exceeding 6% or exceeding actual costs are treated as inducements to purchase and result in a dollar-for-dollar reduction to the purchase price when computing the adjusted value before applying the LTV percentage.
- VA loans: Concessions exceeding 4% of the home’s reasonable value are not permitted.
FHA Seller Concession Limits
FHA-insured loans allow interested parties to contribute up to 6% of the sale price. “Interested parties” includes sellers, real estate agents, builders, developers, and lenders under HUD Handbook 4000.1.
- The 6% covers: Origination fees, closing costs, prepaid items, discount points, permanent and temporary rate buydowns, mortgage interest payments, mortgage payment protection insurance, and the upfront mortgage insurance premium.
- Premium pricing exclusion: Lender credits from premium pricing are excluded from the 6% limit, provided the lender is not the seller, real estate agent, builder, or developer.
- Agent commissions: Real estate agent commissions paid by the seller under local or state law or custom are not considered interested party contributions and do not count toward the 6%.
- Excess contributions: Amounts exceeding actual costs or exceeding 6% are classified as inducements to purchase. The excess triggers a dollar-for-dollar reduction to the purchase price when computing the adjusted value for LTV purposes.
VA Seller Concession Limits
VA loans separate normal closing costs from seller concessions. The seller can negotiate to pay certain closing costs, and those are not counted against the concession limit. Seller concessions are limited separately to 4% of the home’s reasonable value.
- Closing costs the seller can pay: Real estate commissions, loan origination fees, discount points, credit report fees, VA appraisal fees, title insurance, and recording fees. These are negotiated between buyer and seller and are not counted against the 4% cap.
- Concessions counted against the 4% cap: Credits toward the VA funding fee, debt payoff on behalf of the buyer, and prepayment of the buyer’s hazard insurance and property taxes.
- The 4% is measured against: The home’s reasonable value as determined by the VA Notice of Value, not the contract price.
Seller Concession vs Price Reduction vs Rate Buydown
When a seller agrees to help, the credit can take several forms.
- Seller concession: A credit from the seller applied toward the buyer’s closing costs within program limits. On a conventional loan, financing concessions may only be used to pay closing costs and up to 12 months of HOA dues, per the Freddie Mac Seller/Servicer Guide.
- Price reduction: A reduction to the contract sale price. On a conventional loan, the concession percentage cap is based on the lesser of the sale price or the appraised value, per the Freddie Mac Seller/Servicer Guide. On FHA, the cap is 6% of the sale price. On VA, the cap is 4% of the home’s reasonable value.
- Seller-funded rate buydown: The seller’s credit pays discount points that reduce the interest rate. On both conventional and FHA loans, discount points are an eligible use of seller concessions. The rate reduction per point varies by lender, loan type, and market conditions, per the CFPB.
Is the Concession Limit Based on the Sale Price or Loan Amount
On a conventional loan, the maximum financing concession is calculated as a percentage of “value,” which is defined as the lesser of the sale price or the appraised value. It is not based on the loan amount.
- Example: You buy a home for $400,000 with 10% down. Your loan amount is $360,000. The concession cap is based on $400,000. At 6% the maximum is $24,000. That cap is not 6% of the loan amount.
- If the appraisal is below the contract price: If the home appraises at $390,000 but the contract price is $400,000, the concession cap is based on $390,000 because it is the lesser of the two.
- FHA: The limit is 6% of the sale price, per HUD Handbook 4000.1.
- VA: The 4% concession limit is based on the home’s reasonable value as determined by the VA Notice of Value.
Seller Concessions on New Construction
Builder credits toward a buyer’s closing costs are subject to the same loan-program concession limits as a resale transaction.
- Builder incentives count as interested party contributions: Under the Freddie Mac guide, the builder is an interested party. Credits, upgrades, or payments the builder provides to the buyer are subject to the same financing concession limits as a resale transaction.
- Builder forward commitments: If a builder obtained a forward commitment from a lender before the purchase contract and the commitment was not arranged for the specific transaction, the associated costs are excluded from the interested party contribution requirements, per the Freddie Mac Seller/Servicer Guide.
- Disclosure required: All interested party contributions must be documented in the mortgage file and shown on the Closing Disclosure. Contributions paid outside of closing and not disclosed make the loan ineligible for purchase by Freddie Mac.
Frequently Asked Questions
What is the maximum seller concession on a conventional loan with less than 10% down?
The maximum is 3% of the lesser of the sale price or appraised value. On a $300,000 home with 5% down, the seller can contribute up to $9,000 toward your closing costs.
Can seller concessions pay for a rate buydown?
Yes. On both conventional and FHA loans, seller concessions can be used to pay discount points that permanently reduce your interest rate. On an FHA loan, seller concessions can also fund a temporary rate buydown. The rate reduction per point varies by lender and market conditions.
Do seller concessions reduce the sale price?
On a conventional loan, financing concessions within the program limit are used to pay borrower closing costs and up to 12 months of HOA dues. Contributions exceeding the limit are classified as sales concessions. For manually underwritten loans, the dollar amount of any sales concession is deducted from the purchase price before calculating LTV, per the Freddie Mac Seller/Servicer Guide.
Can I combine seller concessions with lender credits?
Yes. On conventional loans, lender credits derived from premium pricing are excluded from interested party contribution limits, even when the originating lender is affiliated with an interested party, per the Freddie Mac Seller/Servicer Guide. On FHA loans, premium pricing credits are excluded from the 6% limit only if the lender is not the seller, real estate agent, builder, or developer. Seller and interested-party financing concessions remain subject to the applicable Freddie Mac limits.
Are seller concessions taxable?
Consult a tax professional for advice specific to your transaction.
How do I know if asking for concessions will cost me the deal?
The answer depends on the property, the listing history, and the number of competing offers. Discuss the concession amount with your agent before submitting the offer.
Why would a seller offer concessions instead of reducing the price?
On a conventional loan, financing concessions go toward borrower closing costs and up to 12 months of HOA dues, per the Freddie Mac Seller/Servicer Guide. Discuss with your agent which approach fits your transaction.
What does the Closing Disclosure show for seller concessions?
Review the Closing Disclosure with your lender before closing to confirm the seller credit matches what was agreed in the contract.
Data and Methodology
Conventional loan seller concession limits in this guide come from the Freddie Mac Single-Family Seller/Servicer Guide, Section 5501.6, effective July 1, 2026. FHA interested party contribution limits come from HUD Handbook 4000.1 as cited by the HUD FHA Resource Center. VA seller concession limits come from VA.gov housing assistance documentation. Mortgage rates are from the Freddie Mac Primary Mortgage Market Survey for the week of October 1, 2026. Guidance on discount points and lender credits references the Consumer Financial Protection Bureau. Computed dollar amounts use the formula: purchase price multiplied by the applicable maximum percentage, assuming the appraised value equals the sale price. No figures from commercial real estate portals, search snippets, or unsourced industry estimates are used in this guide.
