Seller Concession

Seller concessions are closing costs the seller (or builder, or another interested party) agrees to pay on your behalf, lowering the cash you need to bring to the closing table.

When you make an offer, you can ask the seller to credit a dollar amount or a percentage of the price toward your costs. That credit is applied at closing to things like lender fees, title charges, prepaid taxes and insurance, and rate buydowns — so you walk in with less out-of-pocket cash. The seller never hands you money directly; the credit is netted against your closing costs on the settlement statement.

Concessions are negotiated, not guaranteed. They are most common in a balanced or buyer’s market, on new construction, or when a seller would rather contribute to your costs than drop the sticker price. Every loan program caps how much a seller can give — which is exactly what this calculator measures.

The maximum is set by your loan program and, for conventional loans, by your down payment: conventional ranges from 3% to 9% of the price, FHA and USDA allow 6%, and VA allows 4% of the price in true concessions.

Every cap below is a percentage of the property value — the lesser of the sales price or appraised value (FHA and USDA use the sales price). It is not a percentage of your loan amount. This is the single most misunderstood rule in seller concessions, and getting it wrong makes the limit look smaller than it really is.

Every agency caps concessions as a percentage of the property value (the lesser of sales price or appraised value), never as a percentage of the loan amount.

This matters because many calculators — including the legacy version of this one — mistakenly measured concessions against the loan amount. Since your loan is smaller than the price, dividing by the loan inflates the percentage and can wrongly flag a perfectly compliant concession as “over the limit.” This calculator uses the correct % of price basis to decide which programs you fit under.

Each program sets its cap to control risk: the more skin you have in the game (a bigger down payment), the more the seller is allowed to contribute.

The logic is that large seller credits can artificially inflate a home’s price — a seller can “pay” your costs and simply raise the asking price to cover it. To limit that, the agencies tie the cap to your equity and program type:

• Conventional scales with your down payment — 3% at high LTV, rising to 9% once you put 25%+ down, because more equity means less risk of an inflated value.
• FHA (6%) serves lower-down-payment buyers, so its cap is fixed and generous but watched closely by appraisers.
• VA (4%) already bars veterans from paying certain fees, so its 4% “concession” cap covers a narrower set of items on top of normal closing costs the seller may also pay.
• USDA (6%) mirrors FHA for rural, low-down-payment borrowers.

Concessions can pay your closing costs, prepaid items, escrow setup, discount points, and a temporary or permanent rate buydown — essentially the recurring and non-recurring costs of getting the loan.

This calculator builds the concession total from exactly these pieces:

• Closing costs — lender, title, and settlement fees (this calc uses a flat $4,750 Colorado-average estimate).
• Prepaid interest — interest from your closing day through the end of that month.
• Escrow setup — initial deposit for property taxes and homeowners insurance (estimated at 0.8533% of price here).
• Discount points — each point is 1% of the loan amount and permanently lowers your rate.
• Temporary buydown — the escrow that funds a 2-1 or 3-2-1 buydown for your first few years.
• Down payment assistance origination — if a DPA program is used, this calc adds 1% of price.

What they generally cannot pay is your down payment — that has to be your own (or gift/DPA) funds on most programs.

No — on conventional and FHA loans, seller concessions cannot be used toward your down payment; they only offset closing costs, prepaids, and buydowns.

The down payment must come from your own funds, a documented gift, or an approved down payment assistance program. A seller credit that exceeds your actual closing costs cannot be redirected to the down payment — the agencies specifically prohibit it to keep credits from masking a no-money-down purchase.

You lose the excess — a seller concession can only reduce real costs, so any amount above your actual closing costs cannot be paid to you and is simply forfeited.

If you negotiate a $12,000 credit but your total closing costs, prepaids, and escrows come to $9,000, that extra $3,000 does not come back to you in cash and cannot move to your down payment. The credit gets capped at your actual costs and the rest evaporates — the seller keeps it.

Write the concession into your purchase offer as a specific dollar amount or percentage — for example, “Seller to credit buyer $12,000 toward closing costs and prepaids” — staying at or under your program’s cap.

A few tips that make the ask land:

• Use a real number. Run this calculator first so you ask for what you actually need, not a round guess. Asking for too much can trigger an appraisal problem or a counter.
• Stay under the cap. If your ask exceeds the program limit, the excess is wasted and underwriting will trim it anyway.
• Frame it strategically. In a competitive market, a slightly higher price with a matching concession can keep your cash-to-close low while giving the seller their number.
• Watch the appraisal. The home still has to appraise for the contract price; a large concession baked into the price can fall short if the value doesn’t support it.

Your loan officer and agent should coordinate the figure before it goes in writing — that’s the difference between a clean close and a renegotiation.

It adds up your estimated closing costs, prepaid interest, escrow setup, any discount points, any temporary buydown, and optional DPA origination — then shows that total as a percentage of both your price and your loan.

The exact build, line by line:

The hero figure is the sum — your “seller concessions needed.” The calculator then checks that total against each program’s cap (as a % of price) and marks which loan products you fit under.

Enter your purchase price, loan amount, interest rate, and closing day, add any points or buydown, and the calculator shows the concession total and which loan programs allow it.

• Type in your purchase price and loan amount — the gap between them sets your down payment and LTV.
• Add your interest rate and closing day of the month (later in the month means less prepaid interest).
• Optionally add discount points, a temporary buydown dollar amount, and toggle down payment assistance.
• Read the concession total, its % of price, and the Available Loan Products table — green rows are programs your ask fits under, with your LTV bracket highlighted.

Use the total as the credit figure to write into your offer. To pair it with a payment estimate, try our What Can I Afford calculator.