Seller credit is money that a home seller offers a buyer at closing to cover costs that are usually the buyer’s responsibility. The credit is typically 2–9% of the home’s sale price.
Buyers can use seller credits to pay closing costs, lower their interest rate, or cover needed repairs. Under the new real estate commission rules, sellers may also offer credits or concessions to help cover the buyer’s agent’s fee.
Credits must follow the lender’s guidelines, can’t exceed the buyer’s total closing costs, and will reduce the seller’s net proceeds.
An experienced agent can help you negotiate seller credits to get the best outcome, whether you’re buying or selling. You can find an agent on your own, or you can use our tool to quickly compare the top agents in your area.
What is a seller credit?
💡 Quick summary
A seller credit is money the seller agrees to put toward the buyer’s costs at closing. Instead of handing over cash, the seller uses part of their sale proceeds to cover approved expenses.
- 💰 Helps buyers cover closing costs, prepaid expenses, repairs, HOA fees, or even a buyer’s agent commission (if allowed by the lender).
- 📑 Set in the contract and shown on the closing statement—credits can’t exceed total closing costs or lender limits.
- 🤝 Win-win tool: buyers reduce up-front cash needed; sellers attract more buyers or close faster.
Depending on lender approval, a seller credit can cover some or all of the closing costs, repair costs, or other expenses. However, the total seller concessions can’t exceed the total closing costs.
The seller doesn't hand over cash at closing. Instead, they use part of the proceeds from the home sale to cover the agreed-on buyer’s costs.
Seller credit vs price reduction
Both seller credits and price reductions make a property more attractive, but they work differently:
- Seller credit: Reduces the buyer’s out-of-pocket expenses at closing while keeping the purchase price the same. Helpful for buyers with limited cash upfront.
- Price reduction: Lowers the home’s sale price, which reduces the buyer’s loan amount and monthly mortgage payments. The savings last long-term but don’t ease immediate closing costs.
Seller concessions vs seller credit
A seller credit is a type of seller concession.
Seller concessions can be broader incentives than covering specific closing costs. They can include monetary and non-monetary assistance. For instance, a seller could cover the buyer’s moving costs or leave specific appliances behind.
Consider consulting your listing agent to determine what seller concessions make sense for your situation.
How do seller credits work?
Seller credits are often negotiated during the home-buying process. They are specified in the purchase agreement and on the closing statement.
Sometimes, sellers offer seller credits as part of their listing. Other times, buyers and sellers negotiate seller credits to cover unexpected costs, like repairs revealed during the home inspection. The buyer and seller must agree on the amount and whether the credit is a percentage of the sale price or a fixed amount.
Once a buyer and seller agree on the specific seller credits, the buyer’s mortgage lender must approve the terms. This step ensures the seller credit meets the lender’s conditions and doesn’t exceed the limit for the buyer’s mortgage type. The buyer or their buyer's agent will send the terms to the lender.
The seller's credit at closing is applied directly to the buyer’s expenses, reducing the buyer’s up-front costs. No cash is exchanged. The credit is taken from the home sale proceeds. The seller credit amount may not be larger than the closing costs. You can check the seller's credit on the closing statement.
Seller credits example
| Purchase price | $400,000 |
| Down payment (20%) | $80,000 |
| Estimated closing costs (3%) | $12,000 |
| Seller credit | −$6,000 |
| Closing costs after credit | $6,000 |
| Total cash needed at closing | $86,000 |
| Up-front savings from seller credit | ↘ $6,000Savings |
A buyer plans to make a 20% down payment of $80,000 on a $400,000 home and finance the rest with a loan. At closing, the buyer anticipates covering about 3% of the home sale, or $12,000, in closing costs. This brings the buyer’s up-front costs up to $92,000.
To make the home sale more enticing, the seller could offer a set amount, like $6,000, to cover closing costs — dropping the buyer’s closing costs from $12,000 to $6,000. The buyer would then only need to come up with $86,000 upfront.
What can a seller credit be used for?
Depending on the lender's terms and conditions, seller credits can cover many of the expenses buyers face during the home-buying process.
The most common uses include:
- Closing costs: Buyers usually pay 2–5% of the purchase price in closing costs. Seller credits can cover some or all of these, such as title insurance, loan origination, attorney, and lender fees.
Prepaid expenses: Credits can sometimes be applied to prepaid costs like property taxes, homeowners insurance, or buying down the mortgage interest rate. - Home repairs: If an inspection reveals issues the seller won’t fix, a credit can give buyers funds to make repairs after closing with the chosen contractors.
- HOA fees: For homes in an association, credits may help cover HOA fees due at closing, which can be substantial in some communities.
- Buyer’s agent commission: Under new commission rules, sellers may also use credits or concessions to help pay the buyer’s agent’s fee, provided the lender allows it.
An experienced agent can help structure seller credits to comply with lender rules while making your home more attractive to buyers.
Lender limitations on seller credit
What's the max seller credit on a conventional loan?
According to Fannie Mae and Freddie Mac, for conventional loans on a primary residence or second home, seller credits are capped at 3%, 6%, or 9% depending on the loan-to-value ratio; they reach 9% only when the LTV (or combined LTV/CLTV) is 75% or less.[1][2]
For conventional mortgages, you can receive up to:
- 3% in seller credit with a down payment of less than 10%
- 6% in seller credit with a down payment of 10–24%
- 9% in seller credit with a down payment of 25% or more
- 2% in seller credit for investment properties, regardless of the down payment
What's the max seller credit on a government-backed loan?
Government-backed loans have different seller concession limits than conventional loans. However, you’ll want to clarify what counts toward the seller concession maximum. For instance, some government-backed loans allow sellers to pay for the buyer’s closing costs without it counting toward the maximum seller concession limit.
Here are the current seller credit limits for different government-backed loans.
- FHA seller credit limit: The FHA allows a maximum of 6% in seller concessions. The percent is based on the home’s purchase price or appraised value, whichever is lower.[3]
- VA seller credit limit: A VA-backed loan allows seller concessions of up to 4% of the total home loan. But payment of the buyer’s standard closing costs aren't counted toward the 4% seller concession limit.[4]
- USDA seller credit limit: The USDA allows up to 6% in seller concessions. In some cases, the seller may also be able to pay for all the buyer’s loan-related closing costs.[5]
Who benefits from a seller credit?
✅ Buyers
Seller credits can significantly benefit buyers who need help with up-front costs, especially first-time home buyers or those with limited cash.
The seller credits reduce the amount of cash a buyer needs at closing. As a result, the buyer can use their savings and money for other common aspects of the home-buying process, like moving expenses, new furnishings or appliances, or building an emergency fund.
Buyers may also use the credits to lower their mortgage interest rate, resulting in lower monthly payments over the life of the loan. Similarly, buyers purchasing an older home or one that needs repairs can use the credits to cover repair costs.
🚨 Drawbacks for buyers to consider
A large seller credit may require a higher sale price, which could impact property taxes or the loan-to-value ratio. Sometimes, the buyer may save on the front end but pay more over time. The lender's restrictions may limit how the seller credits can be used. If the seller credits exceed what's allowable, unused portions are lost.
You may want to choose a realtor when buying who is familiar with seller credits to make sure this approach fits your situation.
✅ Sellers
Seller credits can be a good strategy for many sellers, especially those selling in a buyer’s market or selling a house that needs repairs or an older home. Sellers can offer these incentives to offset a buyer’s initial costs, which can be especially helpful for first-time home buyers.
Sellers who offer seller credit to buyers can:
- Stand out in a crowded buyer’s market
- Attract more potential buyers by lowering the buyer’s up-front costs at closing
- Close deals faster
- Avoid having to make repairs by providing seller credits instead
🚨 Drawbacks for sellers to consider
As a seller, you'll need to consider how much it costs to sell your house and what you need to earn in proceeds before offering seller credits.
Seller credits can reduce the proceeds from the sale. As a result, some sellers may raise the home's sale price to cover the credits. But the property must appraise at the higher price or this approach won't work. There may be limits on how the credits can be used due to the lender, making it less appealing to some buyers. You may want to choose a realtor when selling who is familiar with seller credits.
FAQ
When should you ask for seller credit?
You should ask for seller credit when you’re negotiating with the seller. Often, buyers ask for seller credit when unexpected issues or repairs on the home are revealed during inspection. Your agent can help you determine if asking for seller credit is right for you. Learn how to find a great agent.
How much seller credit can you get?
How much seller credit you can get depends on your loan type, down payment, and lender guidelines.
- Conventional loans: 3% if your down payment is less than 10% (LTV > 90%); 6% if your down payment is 10–24% (LTV 75.01–90%); 9% if your down payment is 25% or more (LTV ≤ 75%); 2% max for investment properties, no matter the down payment.
- FHA loans: Up to 6%, based on the lower of purchase price or appraised value.
- USDA loans: Generally allow up to 6%.
- VA loans: Up to 4% in seller concessions, but many standard closing costs don’t count toward this 4% cap.
Always confirm with your lender, since allowable amounts can vary by program.
What is seller credit when buying a house?
Seller credit when buying a house is the amount of money the seller will provide the buyer at closing. This sum helps the buyer cover costs that are typically the buyer's responsibility, like their closing costs.
Can seller credit be used for down payment?
No, seller credit can't be used for down payment. A buyer must come up with a down payment from their own resources. However, seller credits can help reduce closing costs, like attorney, loan origination, and inspection fees, allowing the buyer to use their money toward the down payment.
What happens if the seller credit exceeds closing costs?
Seller credits can never be larger than the buyer’s actual closing costs and other lender-approved expenses. If the credit exceeds the costs, the unused portion is forfeited.
Sometimes, lenders may allow the extra to be applied toward prepaid expenses like property taxes, homeowners insurance, or mortgage interest rate buydowns. However, the credit can’t be used for anything outside lender-approved categories, and buyers can't keep the difference as cash.
Related reading
