Seller concessions can be a powerful tool for homebuyers, significantly reducing out-of-pocket expenses at closing. These concessions can help cover closing costs or even be used to lower the buyer's interest rate — either temporarily or permanently through a rate buydown.

When negotiating to purchase a home, some buyers focus on getting the lowest possible sales price, while others prioritize maximizing seller concessions. Which strategy is better? There’s no one-size-fits-all answer- it ultimately depends on each borrower’s financial situation and long-term goals.

In my 20 years as a mortgage professional, I’ve personally found that seller concessions often provide greater immediate value to buyers, especially when funds for closing are tight. Many of my clients feel the short-term financial relief makes a bigger difference than a slightly lower monthly payment.

Example Scenario:

Home List Price: $300,000

Borrower A – Price Reduction Focused

• Offers $285,000 and the seller accepts.
• At a 5.5% interest rate:
• Monthly principal and interest = $1,618
• Compared to purchasing at full price ($1,703/month), this results in a monthly savings of $85.

Borrower B – Seller Concession Focused

• Offers full price of $300,000, but requests $15,000 in seller concessions.
• From the seller's perspective, this nets the same as Borrower A’s offer ($300,000 – $15,000 = $285,000).
• The buyer’s estimated closing costs are $10,000, which are now fully covered.
• The remaining $5,000 is applied to buy down the interest rate from 5.5% to 5.25%.
• Monthly principal and interest = $1,657

*The facts- In the end, Borrower A ends up with a monthly payment that’s $39 lower, but pays an additional $10,000 out of pocket at closing compared to Borrower B. 

Seller Concessions Matrix by Loan Program (2024–2025)

Loan Program                                Max Seller Concessions                                         Notes

FHA                                               6%  of purchase price                        Must be applied to closing costs,

                                                                                                                  pre-paid items, & discount points

Conventional                                  Varies by down payment:                  Must be applied to closing costs,

(owner-occupied)                            -3% if down <10%                                    pre-paid items, & discount points

                                                      -6% if down 10-25%

                                                      -9% if down >25%

Conventional                                 -2%                                                         Strict limits due to investment risk

(investment)                                   

VA                                                  -4%  of purchase price (plus) reasonable closing costs                              

USDA                                               -6%  of purchase price                                 Must be applied to closing costs,

                                                                                                                       Pre-paid items, & discount points

JUMBO                                              Varies by Lender/Investor                    Not government regulated

*Picking the right loan officer to partner with who can better understand your goals and help coach you through the journey of homeownership is priceless.

 

Jesse Young
Neighborhood Loans

jyoung@neighborhoodloans.com 
📞 817-939-1467 (Direct)