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Seller concessions capped by loan program, down payment size
For conventional loans, buyers can receive up to 9% in concessions when the down payment is at least 25%, but conventional caps are lower for smaller down payments.
Housing affordability tweaks like seller concessions can be negotiated in a buyer's market, but the amount is constrained by the loan program and, for conventional mortgages, the size of the down payment, according to Yahoo Finance. The article warns that if a borrower asks for more than the allowed limit, lenders will reduce the concessions at closing. For conventional loans on a primary or second home, concession caps depend on down payment tiers: up to 3% of the purchase price if the down payment is under 10%, up to 6% if the down payment is between 10% and 24.99%, and up to 9% if the down payment is 25% or greater. Concessions are calculated as a percentage of the purchase price or the appraised value, whichever is lower, and example figures include a $450,000 home with a 5% down payment generating maximum concessions of $13,500, while 20% down could allow up to $27,000. The article says concessions can be used to cover closing costs, prepaid expenses, and up to 12 months of homeowners association fees. It also notes limits on how the money can be applied, including that concessions cannot be used for the down payment or to expand cash reserves, and they cannot be applied toward the minimum borrower contribution. Unlike conventional loans, FHA loans do not limit seller concessions by down payment size, HousingWire reports. Yahoo Finance states that FHA maximum seller concessions are 6% of the purchase price or appraised value, whichever is lower, even with the minimum 3.5% down payment.
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