- FHA Loan – Allows for 6 percent seller concessions.
- VA Loan – Allows for 4 percent seller concessions.
- Conventional – Allows for 3 percent seller concessions if your down payment is less than 10 percent, 6 percent if your down payment is from 11 to 25 percent, and 9 percent if your down payment is more than 25 percent.
Closing costs may range from 3 to 6 percent of a mortgage. So, seller-paid closing costs have the potential to save a homebuyer thousands of dollars on a typically priced house.
Reach out to an Academy Loan Officer for more affordable homebuying solutions.
Seeing price reductions in your area is a tip-off that seller concessions may be available to you. As many as 40 percent of sellers have started to drop their prices—most of them in former “pandemic hot spots,” like Provo, Denver, Tacoma, Portland, and Sacramento.
When sellers decrease prices, it often means the asking price is too high for the local market. Mortgage rates have increased from their lowest levels, impacting how much homebuyers can afford. The reason almost half of homes are seeing price reductions in some cities is because mortgage rates are rising. This can drag down a seller’s asking price.
If this happens, a seller becomes more willing to negotiate to ensure they sell their house (without having to drop its price any further). Concessions can help both the buyer and the seller. A seller may offer concessions to make their home more appealing. A buyer may use seller concessions to cover some or all of their closing costs, offsetting the out-of-pocket expenses required to purchase.
A seller might also offer concessions so that a buyer will agree to purchase a less-than-perfect house. If a home needs a few minor repairs, for example, seller concessions could reduce closing costs—leaving a buyer with extra cash they can put toward home upgrades. Additionally, a seller may agree to concessions if they want or need to sell their house quickly.
It’s important to note that a seller offering concessions won’t necessarily take this discount off their home’s price. Instead, a seller will increase the asking price of their home by the amount needed to help pay for closing costs and other expenses. However, a deal could fall through if a home’s appraisal comes in lower than this new sales price; mortgage lenders usually never loan more than the appraised value of a house.