Can the Seller Pay My Closing Costs?
Yes, a home seller can contribute toward a buyer’s closing costs. These contributions are commonly called seller concessions, and they can help reduce the amount of money a buyer needs to bring to closing.
However, there are limits on how much a seller can contribute, and those limits can depend on your loan program, down payment, occupancy, and other factors.
Here’s how seller-paid closing costs work and when they might make sense.
What Are Seller Concessions?
Seller concessions are costs that the seller agrees to pay on behalf of the buyer as part of the purchase agreement.
Instead of simply negotiating the price of the home, a buyer may ask the seller to contribute a specific dollar amount or percentage toward eligible closing costs.
Your real estate agent and Loan Officer can help you determine how to structure the request based on your financing and the home you’re purchasing.
What Closing Costs Can a Seller Pay?
Depending on your loan program and transaction, seller concessions may be used toward eligible expenses such as:
- Certain lender fees
- Title-related costs
- Prepaid property taxes
- Homeowners insurance
- Discount points
- Other allowable closing expenses
Not every expense can be covered by a seller, and the rules vary by mortgage program.
That’s why it’s important to coordinate with your Loan Officer before submitting an offer that includes seller concessions.
How Much Can a Seller Contribute Toward Closing Costs?
There isn’t one limit that applies to every mortgage.
Conventional, FHA, VA, USDA, and other loan programs have their own guidelines regarding interested-party contributions or seller concessions. The maximum allowed can also depend on details of the transaction.
Your Loan Officer can calculate the amount that may be permitted for your specific loan.
Do Seller Concessions Lower the Price of the Home?
Not directly.
A seller concession generally reduces the buyer’s eligible closing expenses rather than reducing the home’s purchase price.
For example, negotiating a lower purchase price and negotiating money toward closing costs can have very different effects on how much cash you’ll need at closing.
For a buyer who wants to preserve savings, a seller contribution toward closing costs may sometimes be more helpful than a similar reduction in the purchase price.
Can Seller Concessions Be Used to Lower My Interest Rate?
In some situations, seller concessions may be used to pay discount points or fund an eligible interest-rate buydown.
That could help reduce the buyer’s mortgage payment, depending on how the loan is structured.
There are specific rules and limitations, so your Loan Officer should review the numbers before you decide how to use a seller contribution.
Do I Have to Ask the Seller to Pay Closing Costs?
Yes. Seller concessions are typically negotiated as part of the purchase agreement and aren’t guaranteed.
Whether a seller is willing to contribute can depend on the property, the strength of your offer, competing offers, and current market conditions.
Your real estate agent can help you determine how a request for seller concessions fits into your overall offer strategy.
Are Seller Concessions the Same as Down Payment Assistance?
No.
Seller concessions come from the seller and are generally used toward eligible costs associated with the transaction.
Down payment assistance programs are separate programs that may provide eligible buyers with assistance toward a down payment, closing costs, or both, depending on the program.
In some situations, buyers may be able to take advantage of more than one source of assistance, subject to loan and program guidelines.
Are Seller-Paid Closing Costs Worth Asking For?
They can be.
Seller concessions may be particularly helpful for buyers who have enough money for their down payment but want to keep more of their savings available after purchasing the home.
But every transaction is different. Sometimes negotiating the purchase price is more important. In other situations, asking for closing-cost assistance could provide a greater immediate benefit.
Understanding the numbers before writing the offer can help you make that decision.
The Bottom Line: Talk to Your Loan Officer Before Making an Offer
Yes, sellers can help pay a buyer’s closing costs, but the amount and eligible expenses depend on the mortgage program and transaction.
That’s why your financing strategy shouldn’t begin after your offer is accepted.
At Michigan Mortgage, we’ll help you understand your estimated closing costs, determine how much a seller may be allowed to contribute, and show you how different scenarios could affect the money you’ll need at closing.
Thinking about buying a home in Michigan? Talk with a Michigan Mortgage Loan Officer before you make an offer. We’ll help you understand your numbers and your options.
