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What Are Seller Credits or Seller Contributions?

Seller Credits or Seller contributions are negotiated between the buyer and seller as part of your purchase and sale agreement and are most commonly expressed as a percentage of the purchase price. 

The amount of the credit is taken from the seller’s proceeds and applied to the buyers closing costs, reducing the amount of cash the buyer will bring to the closing.  Sometimes the selling price of the home is increased to offset the seller credit so the sellers proceeds remain the same with or without the credit.

Once you receive your lender’s loan estimate with closing costs and cash required to close, seller contributions are a great way to reduce the cash you need to close.  A question that a lender often receives is: “What are the limits to these contributions?” It is a great question that has many answers depending on loan type, down payment, type of residence, etc. Below we have outlined the most common limits to Seller Credits.

Always call your lender prior to negotiating seller credits as there are certain circumstances where you may not be able to use the full credit, however there are ways to structure your home purchase and financing to maximize these contributions and your savings!

Seller Credit Limits for Conventional Loans:

Property Type Down Payment Maximum Seller-Paid
Closing Costs
Primary Residence or
Second Home
Less than 10% 3%
Primary Residence or
Second Home
10%-25% 6%
Primary Residence or
Second Home
25% or more 9%
Investment
Property
Any amount 2%

Seller Credit Limits for FHA, VA and USDA loans:

Type of Loan Maximum Seller-Paid Closing Costs
FHA 6%
USDA 6%
VA 4%

Consulting your lender for a prequalification is the best way to ensure you are as prepared as possible to negotiate on your home purchase.  Title Mortgage is always here to help.  Call us today at the office or reach out to one of our loan officers directly!  603-643-1400

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