To get the seller to pay your closing costs, write a request for a seller concession directly into your purchase offer, keep the amount within the cap your loan program allows, and structure the rest of the offer so the seller’s bottom line still works. A seller concession is a credit applied to your settlement charges at closing, not cash handed to you, and how much you can ask for depends on your loan type, your down payment, and how much competition the seller has for the home.
How Much the Seller Can Actually Pay
Every loan program sets a ceiling, calculated on the lesser of the sale price or appraised value. Knowing your cap before you write the offer keeps you from asking for something the lender won’t allow.
Conventional Loans
Fannie Mae and Freddie Mac tie the limit to your down payment. With less than 10% down, the seller can contribute up to 3% of the sale price. From 10% to just under 25% down, the cap rises to 6%. At 25% or more down, it goes to 9%. Investment properties are capped at 2% regardless of down payment. On a $350,000 home with 5% down, that means a maximum of $10,500 in seller-paid costs.1Fannie Mae. Interested Party Contributions (IPCs)
FHA Loans
FHA allows up to 6% of the sale price regardless of down payment. The 6% covers origination fees, other closing costs, prepaid items, discount points, seller-funded rate buydowns, and the upfront mortgage insurance premium. Anything above 6% or above your actual costs reduces the property’s adjusted value dollar for dollar, which shrinks how much you can borrow.2U.S. Department of Housing and Urban Development. What Costs Can a Seller or Other Interested Party Pay on Behalf of the Borrower
VA Loans
VA uses a two-tier system. There is no VA-imposed cap on the seller paying your normal closing costs — title fees, appraisal, origination, recording, and similar settlement charges. A separate 4% cap applies to what the VA calls seller concessions, which include the VA funding fee, prepaid property taxes and insurance, rate buydowns beyond what is customary, gifts like appliances, and payoff of the buyer’s debts. The 4% is figured on the home’s reasonable value from the VA appraisal.3Veterans Affairs. VA Funding Fee and Loan Closing Costs
USDA Loans
USDA Rural Development caps seller contributions at 6% of the sale price, and the contribution has to go toward an eligible purpose such as closing costs or prepaid items.4Rural Development – USDA. Loan Purposes and Restrictions
What the Credit Can and Cannot Cover
Seller concessions can pay for most of the fees you would otherwise owe at closing: the loan origination fee (roughly 0.5% to 1% of the loan amount), title insurance, the appraisal, recording fees, attorney fees, and escrow or settlement charges. They also cover prepaid items — prepaid interest between closing and the start of your first full mortgage month, property taxes that have accrued but aren’t yet billed, and the initial deposit into your homeowner’s insurance escrow.
The credit has hard limits. It cannot go toward your down payment; lenders require that money to come from your own funds or an approved gift source, because it represents your equity stake. It cannot come back to you as cash — if the credit exceeds your actual closing costs, the extra is simply removed. And for most loan programs it cannot pay off your personal debts. VA loans are the exception, where seller-funded debt payoffs count against the separate 4% cap above.
How to Structure the Request So the Seller Says Yes
Simply asking rarely works. The framing inside your offer decides whether the seller sees a reasonable deal or a reason to move on.
- Offer at or above asking price. A full-price offer paired with a concession request often nets the seller the same money as a lower offer without one. A listing at $300,000 with a $300,000 offer and a $9,000 credit request usually beats a $285,000 offer with no concessions.
- Use inspection findings as leverage. If the inspection turns up repairs, ask for a closing cost credit in place of the repairs. Many sellers prefer writing a credit over lining up contractors before closing.
- Keep the rest of the offer clean. If you’re asking for financial help, drop unnecessary contingencies, such as a sale contingency on your current home. A clean offer reassures the seller the deal will actually close.
- Get fully pre-approved, not just pre-qualified. An underwritten pre-approval signals your financing is solid and lowers the perceived risk of agreeing to your terms.
- Ask for a specific dollar amount. “$8,500 toward closing costs” reads better than “6% of the sale price.” A defined number shows you’ve done the math instead of trying to extract the maximum allowed.
Your agent can tell you what the local market treats as normal. In some areas, a 2% to 3% concession request is routine. In others, any request at all reads as a weak buyer. Calibrate to that norm.
When Market Conditions Are on Your Side
Leverage comes from the market. In a buyer’s market, where listings sit and sellers outnumber buyers, a concession request has real weight. A seller who has waited weeks for offers knows that saying no could mean more months of carrying costs.
In a seller’s market with multiple offers on every home, concession requests face an uphill battle. A seller with three competing offers has little reason to accept the one asking for $10,000 back. If you’re determined to ask in that environment, pair it with a stronger offer overall: higher price, fewer contingencies, faster close. Concessions are still possible on listings that have been on the market longer than average or have had deals fall through.
Raising the Price to Offset the Credit
A common workaround is to raise your offer by the amount of the concession so the seller’s net proceeds stay flat. On a $300,000 listing, you offer $309,000 with a $9,000 seller credit. The seller nets the same amount, and you roll the closing costs into your loan.
Two risks come with this. The first is the appraisal. Lenders base the loan on the lower of sale price or appraised value, and appraisers are required to account for the effect of concessions on the sale price.5Freddie Mac Single-Family. Considering Financing and Sales Concessions – A Practical Guide for Appraisers If the appraiser lands at $300,000 rather than $309,000, your concession caps are now calculated on $300,000, and you may have to cover the gap in cash or renegotiate.
The second is the long tail. A larger loan balance means more interest over time. On a 30-year mortgage at 7%, rolling $9,000 into the loan costs roughly $12,500 in additional interest. The “free” closing costs turn into a deferred expense. Whether that trade is worth it depends on how tight your cash is at the table.
Making Sure the Credit Shows Up Correctly at Closing
Once the seller agrees, the credit flows through your paperwork in a defined way. Your lender uses the signed contract to adjust the Loan Estimate, then issues a Closing Disclosure at least three business days before you sign. The seller’s contribution appears as a line item on page 2, usually labeled “Seller Credit” or “Seller Concession.”
Check two things on your final review: the dollar amount matches what your contract specifies, and the credit is applied to your closing costs rather than your down payment. If the credit is larger than your actual closing costs, the excess is not refunded — it’s simply dropped from the settlement.
One Tax Note Worth Knowing
Most seller-paid closing costs have no tax consequences for you. The exception is discount points. If the seller pays mortgage discount points on your behalf, the IRS treats them as if you paid them. You can deduct those points in the year you bought the home if you meet the standard requirements — the home is your primary residence, paying points is an established practice in your area, and the points aren’t unusually high. Otherwise, you deduct them gradually over the life of the loan.6Internal Revenue Service. Publication 936 – Home Mortgage Interest Deduction You then have to reduce your home’s cost basis by the amount of the seller-paid points, which slightly raises your potential taxable gain when you sell, though the home sale exclusion ($250,000 single, $500,000 married filing jointly) shelters most homeowners.7Internal Revenue Service. Publication 530 – Tax Information for Homeowners