Let’s say you find the perfect home, but those closing costs? Not so perfect. Enter: seller credits — one of the smartest tools in your homebuying toolkit.
Whether you’re a first-time buyer trying to save on upfront costs or a savvy negotiator, seller credits can help make your home more affordable without reducing the price. Here’s how it works.
Seller Credits Defined
Seller credits — sometimes called seller concessions — are funds the seller agrees to pay toward your closing costs. Instead of knocking money off the purchase price, they contribute to your fees so you don’t have to pay them out of pocket.
Think of it as the seller saying, “I’ll help cover the tab — just not the entree.”
What Can Seller Credits Cover?
Seller credits can typically be used for:
- Loan origination fees
- Title insurance and escrow fees
- Appraisal and inspection costs
- Prepaid taxes and homeowners insurance
- Discount points (to buy down your interest rate)
They can’t be used for your down payment or to help you qualify for a loan you otherwise wouldn’t.
Why Would a Seller Offer Credits?
Sellers may be open to concessions when:
- They want to close quickly
- The property has been on the market for a while
- You’re offering close to or above asking price
- You’re buying in a buyer-friendly market
It’s a negotiation tactic — and a good one when used wisely.
How It Works in Real Life
Say you’re buying a $400,000 home. You offer full price but ask the seller for $10,000 in credits to cover your closing costs. If the home appraises for at least $400,000 and your lender allows that credit amount, you can close the deal without needing to bring that $10K to the table.
How Much Can the Seller Contribute?
There are limits, depending on your loan type:
- Conventional loans: Up to 3% of the purchase price if you put less than 10% down
- FHA loans: Up to 6%
- VA loans: Up to 4%, plus some additional allowable concessions
Your loan officer will help you structure the credits properly so they’re allowed — and fully used.
Seller Credits vs. Price Reduction
Which is better — a credit or a price cut?
- Seller credit helps with upfront costs, making it easier to close
- Price reduction lowers your loan amount and monthly payment slightly
If you’re short on cash, a credit may be more useful than a small monthly savings.
Tips for Buyers
- Talk to your agent about including a credit request in your offer
- Work with your lender to understand how much you’re allowed to receive
- Don’t over-request — unused credits disappear at closing if they’re not applied to eligible costs
FAQs
Q: Can seller credits cover my entire closing costs?
A: Yes — up to the allowable limit based on loan guidelines and appraisal value.
Q: Do seller credits affect my loan approval?
A: Not if structured properly. Your loan officer will ensure the credits meet guidelines.
Q: Can I combine seller credits with lender credits or down payment assistance?
A: Often, yes — but the total assistance can’t exceed your actual closing costs.
