Seller Credits and Concessions Explained

What credits can typically pay

• Lender fees such as origination and underwriting
• Title, settlement and recording charges
• Prepaid interest, property taxes and homeowners insurance
• Escrow reserve deposits
• Discount points or a temporary rate buydown
• The upfront mortgage insurance or funding fee on applicable programs

What credits cannot do

• Be paid to you directly as cash at closing
• Cover your minimum required down payment on agency programs
• Exceed the program's contribution limit
• Exceed your actual costs, since unused credit generally disappears

Program contribution limits

Conventional, FHA, VA and USDA each cap seller contributions differently, and on conventional financing the cap changes with occupancy and down payment. The practical consequence is that asking for a very large credit on a low down payment conventional loan can exceed the limit and force a contract amendment.

Price versus credit

A seller who will not reduce the price will often pay costs instead, because the net proceeds can be similar. From your side, a credit helps cash today, while a lower price helps your loan amount and payment for thirty years. Which is better depends on whether cash or payment is your constraint.

Before you write the offer, ask me for the exact credit number that covers your costs without waste. Requesting a round figure usually leaves money on the table or blows the program limit.

Educational purposes only. Down payment assistance, grant and credit programs have their own eligibility rules, income and purchase price limits, occupancy requirements, funding availability and repayment terms, and program details change over time. All financing is subject to application, verification, applicable program guidelines and underwriting approval. Not a commitment to lend. Manny Oloyede | Mortgage Broker | NMLS 1824463 | Ultimate Mortgage Brokers LLC. Equal Housing Opportunity.