Seller Concessions

A Seller concession is a gift, an amount of money that a seller commits to pay a borrower to lower the cost of the borrower at closing. It could be especially beneficial to first time home buyers or for someone that does not have sufficient amount for closing costs. 

Since there are a number of costs involved in closing costs, Seller Concessions can be used for fees related to pulling a credit report, HOA fees, Insurance, Inspection fees, Processing fees, Property taxes, Attorney fees, Real Estate Appraisal, Loan Origination Fee, Title Insurance, and Discount points. 

Typically, sellers agree to paying concessions in a buyers market where they are eager to get rid of the house and you as a home buyer can benefit from it. 

There is a maximum limit on seller concessions. Government backed loans specify a maximum limit based upon a percentage of the purchase price of the property. For FHA Loans, the maximum limit is 6%, USDA Loans 6% and VA Loans, the maximum limit is 4% of the purchase price of the property. 

On Conventional Conforming Loans, the limits are based upon the amount of down payment  you would make towards the purchase of the property. If your down payment is less than 10%, the maximum amount a seller can contribute is 3%. If you make a down payment between 10-25%, the maximum amount the seller can contribute is up to 6%. If you make a down payment of 25%, the maximum amount of seller concessions is 9%. 

On Investment Properties, the maximum amount of seller concessions are limited to 2% regardless of the down payment amount or the purchase price of the Investment property.