Seller concessions are money the seller agrees to put toward your closing costs, prepaid items, discount points or a rate buydown. In Texas they're usually written into the TREC resale contract as a dollar amount the seller will pay toward your expenses. Every loan program caps them: FHA at 6 percent of the sales price, VA at 4 percent of the home's reasonable value for "concessions" (with ordinary closing costs not counted), USDA at 6 percent, and Fannie Mae from 2 to 9 percent depending on your loan-to-value and occupancy. Concessions can't pay your down payment, and any amount over your actual costs or the cap doesn't come back to you as cash.
A concession doesn't change the price. It moves money at closing from the seller's side of the Closing Disclosure to yours, to pay costs you'd otherwise pay in cash. Typical uses:
A concession and a price cut aren't the same. A lower price reduces your loan amount and down payment. A concession pays costs. They feel similar and they calculate differently, so it's worth running both before you write the offer.
Interested parties, including the seller, builder and real estate agents, can contribute up to 6 percent of the sales price toward your origination fees, other closing costs, prepaid items and discount points. That 6 percent also includes seller-paid permanent and temporary buydowns, payments of mortgage interest on fixed-rate loans, and the upfront mortgage insurance premium. Contributions above 6 percent, or above your actual costs, are treated as an inducement to purchase, which reduces the price used to figure your loan-to-value dollar for dollar, and contributions can't be used for FHA's minimum required investment. Real estate commissions customarily paid by the seller under local law or custom aren't counted as interested party contributions (HUD 4000.1 II.A.4.d.iii(G) and (H)).
VA separates two things. VA doesn't limit seller credits for the loan's normal closing costs. It does limit seller concessions to no more than 4 percent of the home's reasonable value, the value on the VA Notice of Value. VA describes concessions as anything of value added at no cost to the buyer, like paying the VA funding fee, paying off the buyer's debts, or prepaying the buyer's hazard insurance (VA funding fee and closing costs). VA's purchase loan fee page lists seller-funded temporary buydowns as part of the 4 percent and says discount points aren't subject to it (VA purchase loan fees). See VA loans.
The seller or another interested party can't contribute more than 6 percent of the sales price toward your financing costs, closing costs, escrow accounts, furniture or other giveaways, unless USDA provides otherwise (7 CFR 3555.102(h)).
Fannie Mae's limit is based on the lower of the price or appraised value (Selling Guide B3-4.1-02):
Amounts over the limit, or over your actual costs, are sales concessions, and the price is reduced by that amount for loan-to-value. Common and customary fees a seller pays under local custom don't count, and Fannie confirmed in April 2024 that a seller-paid buyer's agent commission paid under local custom isn't counted toward the limit either (Fannie Mae Selling Notice, Apr 15, 2024). Freddie Mac sets its own limits in its Guide, so the exact cap depends on which agency your loan is sold to.
On the TREC One to Four Family Residential Contract (Resale), TREC No. 20-19 (form dated 05-04-2026), seller help usually goes in Paragraph 12A(1)(b): the seller agrees to pay "an amount not to exceed" a dollar figure toward the buyer's expenses, other than brokerage compensation. Paragraph 12B is a separate place for the seller to pay toward the buyer's broker. Paragraph 12C says that if a government loan program doesn't let the buyer pay a certain fee, the concession goes to those fees first (TREC 20-19).
Write a dollar cap that fits your loan type and your actual costs. A contract that says the seller will pay "all of the buyer's closing costs" with no number can collide with the program cap, and anything that doesn't fit doesn't turn into a check for you.
A big concession can push buyers to offer a higher price to cover it. That only works if the appraisal supports the price. If the home appraises low, the lender uses the lower value, and the concession limits on most programs are tied to the price or value too. See cash to close for how this flows into the money you bring.
A lender credit comes from the lender, usually in exchange for a slightly higher rate, and isn't a seller concession. FHA's 6 percent limit excludes premium pricing credits from the lender as long as the lender isn't also the seller, agent, builder or developer. You can use both, as long as together they don't exceed your actual costs. See lender credits.
This example is made up to show how the caps work.
Andre is buying a $300,000 home in Saginaw with an FHA loan. His estimated closing costs and prepaids come to $11,000. FHA's cap is 6 percent of the sales price, or $18,000, so a seller concession of up to $11,000 fits, and his contract says the seller will pay "an amount not to exceed $11,000" in Paragraph 12A(1)(b). If he'd asked for $15,000, the extra $4,000 wouldn't come back to him as cash, and FHA would treat it as an inducement that lowers the price used for his loan-to-value. If he'd been using a conventional loan at 95 percent loan-to-value, Fannie's cap would be 3 percent, or $9,000, so the same request wouldn't fit. Either way, HUD's minimum required investment on his FHA loan still has to come from his own funds or another allowed source.
Writing an offer and want seller help? Before you send it, let me give your agent the right concession number for your loan type so it fits the cap and your real costs. Schedule a call, or when you're ready, start an application.
Links checked Oct 21, 2026.
About the author: McKade Lively, NMLS 2704474, American Pacific Mortgage Corporation dba True North Home Loans, NMLS 1850.
Equal Housing Opportunity.
Last reviewed: Oct 2026