Seller concessions are costs paid by the seller on the buyer's behalf, typically applied to reduce the buyer's closing costs. Maximum concession limits vary by loan program and LTV, and exceeding them is one of the most common compliance errors at closing.
Fannie Mae and Freddie Mac Concession Limits
- ✦Owner-occupied primary: 3% for LTV above 90%, 6% for LTV 75.01% to 90%, 9% for LTV at or below 75%.
- ✦Second home: 6% maximum regardless of LTV.
- ✦Investment property: 2% maximum regardless of LTV.
FHA, VA, and USDA Limits
- ✦FHA: 6% maximum on seller concessions.
- ✦VA: 4% maximum on seller concessions (can include funding fee payoff if applicable).
- ✦USDA: 6% maximum.
What Counts as a Seller Concession
Concessions include prepaid items like taxes and insurance paid at closing, discount points paid by the seller, and title insurance paid by the seller on the buyer's behalf. Repair credits are typically not concessions if handled as purchase price adjustments, but some underwriters treat repair escrow holdbacks as concessions. Any credit above the applicable limit must be removed from the transaction or the purchase price must be reduced by the excess amount.
Aria can confirm exact concession limits by program, flag common structuring errors, and explain how to handle credits that exceed the applicable cap. Ask at vicariointel.com.
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