Understanding seller concession limits by loan type is critical to avoid closing delays or loan denials. Different loans—like FHA, VA, USDA, and conventional—have specific caps on how much sellers can contribute toward buyer closing costs. Exceeding these limits can derail your deal. Smart buyers calculate seller concessions based on their loan type early to keep negotiations clean, financing smooth, and avoid costly mistakes at the closing table.
Wait… What Are Seller Concessions?
Seller concessions are basically money the seller agrees to kick in to help cover your closing costs.
Could be things like:
- Loan origination fees
- Appraisal fees
- Title insurance
- Property taxes (prepaid)
- Mortgage points
So why don’t buyers just ask for a fat stack of concessions on every deal?
Because there’s a cap—based on the loan type. Yep. Seller concession limits by loan type are set by Fannie Mae, Freddie Mac, FHA, VA, and USDA… and if you cross the line, your loan can get rejected.
Seller Concession Limits By Loan Type
You gotta know the guardrails. Different loans = different rules.
| Loan Type | Concession Limit (Based on Purchase Price) |
|---|---|
| Conventional (Primary & Secondary Residence) |
|
| Conventional (Investment Property) | 2% |
| FHA Loans | 6% |
| VA Loans | Seller can pay all allowable costs + 4% in concessions |
| USDA Loans | Up to 6% |
That’s the no-BS version. No guesswork. No hidden rules. And definitely nothing your lender should skip telling you.
Why Do Lenders “Forget” This?
It’s not about bad people, it’s about incentives. Lenders often focus on closing the loan, collecting the fee, moving on. But here’s the problem: they focus on approving the deal, not helping you structure the best one.
So yeah, they may neglect to mention:
- How seller concessions impact whether your offer gets approved
- That you may be wasting time negotiating a concession above allowable %
- How concessions + discount points affect your loan structure
- If asking for a full 6% hurts your chances with a seller in this market
And that leads to wasted time. Or worse—wasted money.
Real Talk Example
Just helped a buddy in Ohio. He was buying a $350K house with an FHA loan. He asked for the seller to cover $25K in closing costs. That’s over 7%. The seller said okay initially—but then the loan underwriter shot it down. FHA caps concessions at 6%. That little error almost nuked the deal. We had to rewrite the offer, renegotiate the price, and reset closing timelines. A skilled lender would’ve flagged that upfront.
This is why seller concession limits by loan type can’t be some buried detail—they can kill your momentum if you don’t get them right.
Why FHA and VA Give You Some Room
With FHA loans, the 6% concession limit includes closing costs and even prepaid items like taxes and insurance. But VA loans? Totally different animal. The VA allows up to 4% toward concessions—not closing costs. That’s on top of the standard allowable closing costs. So you could, technically, have the seller cover:
- All normal closing costs
- 4% of purchase price toward things like prepaid taxes, VA funding fee, even paying off debts, setting up an escrow account…
Pretty wild. But don’t blow past 4%—VA guidelines are strict.
How Sellers Think About Concessions
No seller wants to feel like they’re giving up money. If you’re asking for a 6% concession? They’re thinking, “Cool, so this offer is actually $30K lower.. It can work—especially if you up the offer a bit to cover closing costs. But get your lender involved early. Then the numbers are clean, legal, and bulletproof.
The IRS Has Nothing On Loan Limits
Just like with tax brackets, loan limits change every year—based on what the market’s doing. The 2024 conforming loan limit for most areas: $766,550. You go over that, now you’re in jumbo loan territory—which comes with higher rates, stricter credit requirements, and… surprise… no seller concessions at all. You can check the latest loan limits here reAlpha’s recent buyer insights.
Loan Limits & Concessions Combo: Where It Goes Sideways
Here’s where buyers mess up:
- You go above conforming loan limit = different loan rules
- You stack up seller concessions > allowed = denied
- You count seller help in the wrong category (concession vs cost) = delayed or denied
This isn’t just about being cautious. It’s about staying in control of your deal. Want smoother closings? Know the rules. Leverage the right loan. And calculate seller concession limits by loan type like a pro.
Why This All Matters Right Now
In a seller’s market, chances are slim you’ll get huge concessions. In a buyer’s market though—this is how you win. You can keep cash in your pocket without affecting financing. The trick? Asking for the RIGHT amount… that your loan will actually let you use.
Conclusion:
Understanding seller concession limits by loan type isn’t just a technical detail—it’s the difference between a smooth closing and a deal falling apart. Whether you’re using an FHA, VA, USDA, or conventional loan, knowing the exact limits keeps your negotiations sharp, your financing clean, and your path to ownership stress-free. Don’t leave it to chance or assume your lender will catch everything. Know the rules, work the numbers, and structure your offer like a pro. In today’s market, smart moves win homes—and avoiding concession mistakes is one of the smartest moves you can make.
