Franklin, Tenn. — October 4, 2026

Seller concessions are back in more purchase contracts as inventory builds and buyers negotiate harder. Before an offer asks for a round-number credit, borrowers and agents need the loan-program ceiling. Lenders treat seller-paid closing help as interested-party contributions. Those contributions can offset eligible closing costs and many prepaid items. They generally cannot fund the down payment, reserves, or a cash refund to the buyer, and they cannot exceed the buyer’s actual allowable closing costs.

Conventional loans sold to Fannie Mae illustrate the structure most purchase files follow. For a principal residence or second home, maximum financing concessions are generally 3 percent of the lesser of sale price or appraised value when loan-to-value exceeds 90 percent; 6 percent when LTV is from 75.01 percent through 90 percent; and 9 percent when LTV is 75 percent or less. Investment-property transactions are generally limited to 2 percent. Contributions above the permitted limit can force a dollar-for-dollar reduction in the sales price used for underwriting and loan-to-value calculations. Fannie Mae also states that interested-party contributions may not be used to make the borrower’s down payment, meet reserve requirements, or satisfy minimum borrower contribution rules.

FHA and USDA each generally allow seller contributions up to 6 percent of the sales price toward eligible closing costs, discount points, and prepaid expenses—again not toward the required down payment or minimum investment. VA financing uses a two-part framework: the seller may pay customary closing costs, and may also provide limited additional concessions (commonly described as up to 4 percent of the sale price) for specified items such as prepaid taxes and insurance or certain borrower debts, subject to VA rules and the lender’s documentation. Exact item lists and edge cases belong in the loan estimate and underwriting file, not in informal offer language.

Practical offer drafting follows from those caps. Buyers should estimate true closing costs first, then request a specific dollar amount that fits both the budget and the program limit—asking for 6 percent when the file is capped at 3 percent only creates a last-minute amendment. The credit must appear in the purchase contract. The lender needs the amount early; a late-discovered concession can delay clear-to-close. If the seller agrees to a credit but raises the contract price by the same amount, the buyer may simply finance the closing costs into a larger loan rather than reduce cash out of pocket in a lasting way.

Program caps also explain why local negotiating power and mortgage rules must be read together. A seller in a high-concession metro may be willing to offer more help than the buyer’s loan type can absorb. Excess above actual costs does not become a check at the table. Matching the ask to eligible costs—and to conventional, FHA, VA, or USDA limits—keeps the credit usable when the file reaches underwriting.

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