US Real Estate & Mortgage Research Analyst
Published: April 3, 2026 · Updated: April 3, 2026 · 7 min read
Key Takeaways
- • Concessions = seller-paid buyer closing costs, not a price cut
- • Loan programs cap concessions as a % of price/value
- • They lower cash to close, not the loan amount
- • Cannot be used for the down payment
- • Confirm current limits with your lender for your loan type
In a purchase, the seller may agree to pay some of the buyer’s closing costs. These "seller concessions" can be the difference between a deal that closes and one that falls apart over cash. Here is what they are and where the boundaries are.
How Concessions Appear at Closing
Concessions show up as credits on the closing disclosure: the seller’s contribution offsets the buyer’s listed closing costs. They are negotiated into the contract (often as a percentage of price or a flat dollar amount) and must stay within the limits set by the buyer’s loan program.
Where the Limits Come From
Each loan type — conventional, FHA, VA, USDA — places its own cap on concessions, frequently tied to the size of the buyer’s down payment. A larger down payment often allows a higher concession percentage. Because these caps are set by program guidelines and can change, the authoritative source is your lender or loan officer for the specific loan you are using.
Illustrative Structure (not exact limits)
• Smaller down payment → tighter concession cap
• Larger down payment → higher concession cap
• Concessions apply to costs, not the down payment
Confirm the current percentages with your lender; program caps change over time.
Negotiation Strategy
- Ask when cash-constrained: Concessions help if you are short on closing funds but not on monthly payment.
- Don’t over-ask: Requesting more than allowed wastes leverage; know the cap first.
- Pair with price: A higher price with concessions can sometimes net the same outcome — but affects the loan-to-value and appraisal.
Estimate Your Costs First
Before negotiating, use our free Closing Cost Estimator to get a sense of the costs a concession could cover, and the Mortgage Payment Calculator to see how price and loan size interact.
Editor Update Note
This article was last reviewed and updated on April 3, 2026. Concession limits are set by loan-program guidelines and can change; always confirm current caps with your lender.
Try These Free Calculators
- Closing Cost Estimator — See the costs concessions could cover.
- Mortgage Payment Calculator — Model price and loan size.
Frequently Asked Questions
What are seller concessions?
Seller concessions are amounts the seller agrees to contribute toward the buyer’s costs — most often closing costs and sometimes discount points or prepaid items. They reduce the cash the buyer must bring to closing, but they do not lower the home’s sale price unless renegotiated separately.
Are there limits on how much a seller can pay?
Yes. Loan programs cap concessions as a percentage of the home’s value or price, and the cap often depends on your down payment. Government-backed loans in particular set tiered limits. The exact percentages change, so confirm the current caps with your lender or loan officer for your specific program.
Do concessions lower my mortgage amount?
No. Concessions are credits applied at closing, not a reduction of the loan. Your loan is based on the agreed price and your down payment. Concessions instead lower the cash you need to close; the financed loan balance is unaffected.
Can concessions be used for the down payment?
Generally no. Concessions are meant for closing costs, prepaid items, or discount points — not the buyer’s down payment. Down payment funds must come from the buyer or an allowable gift or assistance source per program rules.
Are concessions taxable or reported income?
Seller concessions are a normal part of a real estate transaction and are not income to the buyer. They are reflected in the closing disclosure as credits. For any tax questions, speak with a qualified tax professional.