Seller Concessions: Limits by Loan Type for New-Home Buyers

Seller concessions are money the seller or builder puts toward your closing costs, and every major loan type caps them. On a conventional loan backed by Fannie Mae, the cap is 3%, 6% or 9% of the price, depending on your down payment. On an FHA loan it is 6% of the sales price. Go over the cap and the extra does not simply turn into cash for you. It gets taken off the price on paper.

That last part is the one most new-home buyers miss. A big builder credit can look great on the contract and then shrink once the lender applies the rules.

What are seller concessions?

Seller concessions are payments from someone on the selling side that cover costs you would normally pay. Lenders call them ""interested party contributions."" Fannie Mae's Selling Guide (section B3-4.1-02, dated May 7, 2025) defines them as ""contributions made by third parties with a vested interest in the transaction."" It lists builders as interested parties.

FHA uses almost the same idea. HUD's Single Family Housing Policy Handbook 4000.1 (last revised Aug. 12, 2026) names sellers, real estate agents, builders, developers and lenders as interested parties.

So when a builder offers to pay closing costs, prepaid items or a rate buydown, that money is a seller concession. It counts toward your loan's limit.

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What can seller concessions pay for?

Under Fannie Mae's rules, these ""financing concessions"" can pay your closing costs, including prepaid items. They can also cover HOA assessments for up to 12 months after closing.

Under FHA rules, interested parties can pay your origination fees, other closing costs, prepaid items and discount points. HUD says the FHA limit also includes permanent and temporary rate buydowns paid by an interested party, and the upfront mortgage insurance premium.

There are things concessions cannot do:

Your down payment. Fannie Mae says it ""does not permit IPCs to be used to make the borrower's down payment."" They also cannot count toward your required reserves or your minimum contribution.
More than your actual costs. Fannie Mae says financing concessions cannot be more than your closing costs. FHA says contributions above your actual fees, closing costs, prepaid items and discount points are an ""inducement to purchase.""

How much can a seller or builder pay toward closing costs?

Here are the caps from the primary sources, checked Oct. 13, 2026.

Conventional loans (Fannie Mae), for a home you will live in or a second home:

Loan-to-value above 90% (less than 10% down): 3%
Loan-to-value from 75.01% to 90%: 6%
Loan-to-value of 75% or less (25% or more down): 9%

Fannie Mae figures the percentage on ""the lower of the sales price or appraised value (not the loan amount).""

FHA loans: Interested parties ""may contribute up to 6 percent of the sales price,"" according to HUD's Handbook 4000.1.

USDA loans: USDA's own proposed rule, published April 20, 2026, describes its current combined limit as 6 percent of the sales price.

VA loans: VA has its own seller concession rule. Ask a VA-approved lender for the current limit before you sign.

What do the caps look like in real dollars?

The table below uses a clearly labelled EXAMPLE price of $400,000. It is not a real home or a real builder offer. It only shows how the percentages work.

EXAMPLE loan on a $400,000 home	Down payment	Concession cap	Most the seller can pay
Conventional	5% ($20,000)	3%	$12,000
Conventional	10% ($40,000)	6%	$24,000
Conventional	25% ($100,000)	9%	$36,000
FHA	3.5% ($14,000)	6%	$24,000

Notice the jump. In this example, an FHA buyer with 3.5% down can receive twice as much help as a conventional buyer with 5% down. That can change which loan makes sense for you.

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What happens if the builder credit is over the limit?

This is where buyers get surprised.

On a conventional loan, Fannie Mae treats the extra as a ""sales concession."" It must be deducted from the sales price. Your lender then figures the loan-to-value ratio again, using the lower number.

Say a builder offers a $20,000 credit on the EXAMPLE $400,000 home and you put 5% down on a conventional loan. Your cap is $12,000. The extra $8,000 is treated as if the price were $392,000. Your loan amount is then based on that lower price. That can change how much cash you need at closing.

On an FHA loan, HUD says contributions over 6% are an ""inducement to purchase."" Inducements cause ""a dollar-for-dollar reduction to the purchase price"" before the loan-to-value is applied.

Either way, money over the cap does not reach your pocket. That is why you want the numbers checked before you sign the contract, not after.

Do builder rate buydowns count as seller concessions?

Usually, yes. HUD's handbook says FHA's 6% limit includes interested-party payments for permanent and temporary rate buydowns. So a builder-paid 2-1 buydown and a builder closing-cost credit share the same 6% bucket on an FHA loan.

Fannie Mae has one notable exception. A ""standby commitment"" between a builder and a lender for blanket rate coverage, signed before your sales contract, is not subject to the maximum financing concession limits. Your lender can tell you which kind of rate offer you are getting.

If you want to compare the types of buydowns, see our guide to builder mortgage rate buydowns.

Which costs do not count toward the cap?

Some seller-paid costs sit outside the limit.

Fannie Mae: fees the seller pays by local custom, which it calls ""common and customary fees,"" are not counted.
FHA: a real estate agent commission that the seller typically pays ""under local or state law, or local custom"" is not an interested party contribution. Lender credits from premium pricing are also outside the 6% limit, as long as the lender is not the seller, agent, builder or developer.

Rules like these are why two offers with the same dollar amount can work very differently.

What this means for new-construction buyers

Builders often advertise help with closing costs or a lower rate. Those offers can be valuable. But the loan you choose decides how much of that help you can actually use.

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Here is a simple plan:

Get the offer in writing. Ask the builder to list each credit: closing costs, prepaid items, rate buydown, and anything else.
Add it all up. On FHA, buydowns and closing-cost help count together toward 6%.
Check your down payment. On a conventional loan, putting 10% down instead of 5% moves the cap from 3% to 6%.
Ask your lender to run the numbers before you sign. Ask: ""Is any of this credit over my limit?""
Compare a price cut too. Sometimes a lower price works better than a credit you cannot fully use. Our guide to builder closing-cost incentives walks through that check.

Builder incentive amounts change often, so we do not list them here. Call 561-704-0091 for today's numbers on the communities we list.

Common Questions

What are seller concessions?

Seller concessions are payments from the seller, builder or another interested party toward costs the buyer would normally pay, such as closing costs. Lenders call them interested party contributions. Each loan type limits how much is allowed.

What is the maximum seller concession on a conventional loan?

For Fannie Mae loans on a home you will live in, the cap is 3% with less than 10% down, 6% with 10% to under 25% down, and 9% with 25% or more down. The percentage is figured on the lower of the sales price or appraised value.

What is the FHA seller concession limit?

HUD's Handbook 4000.1 says interested parties may contribute up to 6 percent of the sales price. That 6 percent includes builder-paid rate buydowns and payment of the upfront mortgage insurance premium.

Can seller concessions be used for the down payment?

No. Fannie Mae does not allow interested party contributions to make the borrower's down payment. They also cannot count toward required reserves.

What happens if seller concessions go over the limit?

On a Fannie Mae loan, the extra is treated as a sales concession and deducted from the sales price before the loan-to-value is figured. On an FHA loan, the extra is an inducement to purchase and reduces the price dollar for dollar.

Does a builder rate buydown count as a seller concession?

On an FHA loan, yes. HUD says the 6 percent limit includes interested-party payments for permanent and temporary buydowns. Fannie Mae excludes builder-lender standby commitments for blanket rate coverage signed before the sales contract.

Ready to take the next step?

Call 561-704-0091 to talk with a National House Search specialist, or Schedule a visit.