What a seller concession is, and what the cap actually is
A seller concession is anything of value the seller puts into the transaction on the buyer's behalf — most often money applied at closing toward the buyer's costs. Sellers agree to them routinely. There is no single cap: the ceiling is set by the buyer's loan program, and in the conventional case it moves with the size of the down payment.
The short version, with the conditions that make each number true. Conventional loans backed by Fannie Mae allow 3 percent where the loan-to-value ratio is above 90 percent, 6% between 75.01 and 90 percent, 9 percent at 75% or below, and 2 percent on an investment property at any ratio. FHA allows a flat 6 percent of the sales price. VA limits concessions to 4% of the property's reasonable value. USDA's guaranteed program allows 6 percent of the sales price. Every one of those percentages is wrong if the condition attached to it is dropped, which is how most of the figures circulating online came to be wrong.
A seller concession and a seller credit are, in practice, the same money under two names. Agents tend to say credit; lenders say concession, or more formally interested party contribution — a contribution toward the buyer's costs from anyone with a stake in the sale closing. The cap is written against the lender's term, which is why a buyer who only knows the agent's term can be surprised by the result.
Conventional: a ladder keyed to the down payment
Fannie Mae's Selling Guide sets the conventional limits at section B3-4.1-02.
- Principal residence or second home, LTV or CLTV greater than 90 percent: maximum 3%.
- Principal residence or second home, 75.01 to 90 percent: maximum 6 percent.
- Principal residence or second home, 75% or less: maximum 9 percent.
- Investment property, all CLTV ratios: maximum 2 percent.
The band boundaries are inclusive as printed, and the percentage is taken against the lesser of the sales price or the appraised value in Fannie Mae practice, not against the loan amount.
What that ladder means to a buyer holding an inspection report is that two people can ask the same seller for the same sum on the same house and get different answers from their lenders. On a four hundred thousand dollar purchase, a buyer putting 3% down sits above 90 percent LTV and has about twelve thousand dollars of room in total — and only if nothing else is already being covered out of it. A buyer putting 25 percent down has three times that. The size of the down payment, which has nothing to do with the roof, decides how much of the roof the seller is permitted to pay for.
Freddie Mac's Single-Family Seller/Servicer Guide sets the same ladder at section 5501.6. That text could not be read at its own source for this page — Freddie Mac's guide site requires authentication — so it is treated here as corroboration rather than as a citation, and Fannie Mae is the primary conventional source quoted. For either investor the practical answer a loan officer gives is the same.
FHA: 6 percent of the sales price, and it does not move
HUD's Single Family Housing Policy Handbook 4000.1 states that "Interested Parties may contribute up to 6% of the sales price toward the Borrower's origination fees, other closing costs, prepaid items and discount points." Interested parties, in the handbook's definition, are "sellers, real estate agents, builders, developers, Mortgagees, Third Party Originators (TPO), or other parties with an interest in the transaction."
Two things about that 6 percent are routinely misstated. It is flat: unlike the conventional ladder it does not vary with the down payment. And it is wider than it looks, because the handbook folds several other items into the same limit — interested party payment for permanent and temporary interest rate buydowns and other payment supplements, payments of mortgage interest on fixed rate mortgages, mortgage payment protection insurance, and payment of the upfront mortgage insurance premium. A buyer who assumes the whole 6 percent is available for a repair credit may find most of it already committed.
Two things are carved out of it. Premium pricing credits from the mortgagee or third party originator are excluded, provided that party is not the seller, agent, builder or developer. And real estate agent commissions or fees "typically paid by the seller under local or state law, or local custom" are not treated as an interested party contribution at all. The handbook is published as a consolidated PDF on HUD's site, which carries a standing note that section-level effective dates should be checked against the online version.
VA: 4 percent, but not of what most people think, and not on everything
The VA limit is the most widely misreported figure in this set, in two separate ways.
The first is what the 4% applies to. VA.gov states: "We allow home sellers or builders to offer credits to cover some or all of the buyer's closing costs. We don't limit credits for a loan's closing costs, but we do limit seller's concessions to no more than 4% of your home's reasonable value." A seller paying the buyer's ordinary closing costs on a VA loan is therefore not making a concession at all and is not capped by the 4 percent. The limit bites on "anything of value added to the transaction at no additional cost to the buyer" — VA names credits for the funding fee, payoff of the buyer's debts, and prepayment of the buyer's hazard insurance.
The second is the base. VA's current consumer page, updated in October 2026, states the limit as 4 percent of the home's reasonable value, which is the figure on the VA Notice of Value and is not necessarily the sales price. VA's own 2022 Buyer's Guide says something different — 4% of the loan amount in one sentence and 4 percent of the sale in another. The two documents disagree, and this page treats the VA.gov page as primary and current and the Buyer's Guide as an older restatement. The operative lender-facing source is Chapter 8 of VA Pamphlet 26-7, the Lender's Handbook, which is the document a loan officer will work from.
USDA: 6 percent, written as a prohibition
The USDA guaranteed program's limit is not in a handbook at all. It is in the Code of Federal Regulations, which makes it the strongest-sourced number on this page. Under 7 CFR 3555.102(h), the guarantee does not extend to "purchasing a home if the seller, or other interested third party, contributes more than 6 percent, unless otherwise provided by the Agency, of the property's sales price toward the purchaser's mortgage financing costs, closing costs, escrow accounts, furniture or other giveaways."
Read the construction: it is drafted as a restriction on what the agency will guarantee rather than as a permission granted to the seller. USDA's technical handbook HB-1-3555 restates it at paragraph 6.2.C — "Seller contributions (or other interested parties) are limited to six percent of the sales price and must represent an eligible loan purpose" — and adds two conditions that matter after an inspection. Concessions cannot fund personal debt or movable property. And seller concessions for repairs must be held in an escrow account, with a cross-reference to the handbook's escrow chapter. That is the clearest statement any agency makes that a repair concession is not simply cash at closing.
One change is pending. In April 2026 the Rural Housing Service published a proposed rule amending 7 CFR 3555.102(h) so that "Real estate commission fees are excluded from the 6% seller concession limitation," aligning USDA with FHA, VA and the conventional investors after the national commission-practice settlements. The comment period closed in June 2026. It is a proposed rule, not a final one, so the exclusion is not yet the law and should not be relied on. The current text is at eCFR section 3555.102.
What happens when a concession goes over the cap
Nothing dramatic happens at the closing table. The damage is done earlier and more quietly, in underwriting.
Fannie Mae divides interested party contributions into financing concessions — contributions toward the buyer's closing costs, or toward homeowners association assessments for up to twelve months past settlement — and sales concessions, which include cash gifts, rebates, personal property and "financing concessions exceeding maximum limits." Sales concessions "must be deducted from the property's sales price for LTV/CLTV calculations." So the excess is not refused. It is reclassified, and then subtracted from the number the loan is measured against. A buyer at the top of a loan-to-value band can be pushed into the next one by their own successful negotiation.
FHA reaches the same place by a different route. Contributions "exceeding 6 percent are considered an inducement to purchase," as are contributions that exceed the buyer's actual origination fees, other closing costs, prepaid items and discount points. An inducement to purchase reduces the basis the loan is calculated on.
The practical rule that follows is worth stating plainly: there is no benefit to negotiating a concession larger than the cap, and there is real risk in it. The surplus cannot be taken as cash, it cannot be redirected to the down payment on an FHA loan, and the attempt can make the loan worse. A buyer who wants more than the cap allows is looking for a different instrument, usually a price reduction, which no loan program limits.
Checking your own number before you ask
Four questions settle it, and all four can be answered before a counteroffer goes out.
- Which program is the loan. Conventional, FHA, VA and USDA give four different answers, and the difference between the smallest and the largest is more than double.
- What the loan-to-value ratio is. This only matters on a conventional loan, where it is the whole of the question. Above 90 percent the ceiling is a third of what it is below 75%.
- What is already drawing on it. A closing-cost allowance already written into the contract, a rate buydown, prepaid items and, on an FHA loan, the upfront mortgage insurance premium all sit inside the same capped pool as the repair money.
- What the base is. Conventional caps run against the lesser of the sales price or the appraised value; FHA and USDA against the sales price; VA against the reasonable value on the Notice of Value. These are not the same number, and on a property that appraised below contract the difference is material.
A loan officer can give all four figures in a single conversation. That conversation is cheaper than a renegotiation, and it is the difference between asking for a number the seller might say yes to and asking for a number the file cannot carry.