Seller Concessions Limits: FHA, VA and USDA Caps

Published by the Modern Lending Solutions editorial team. Last reviewed: October 30, 2026.

Short answer: a seller, builder, agent or other party with an interest in the sale can pay some of your costs to buy a home, but each federal loan program caps it. For FHA loans, HUD caps these interested party contributions at 6 percent of the sales price. For VA loans, the VA Lenders Handbook treats seller concessions above 4 percent of the reasonable value as excessive, but it does not count normal discount points or your closing costs toward that limit. For USDA guaranteed loans, the regulation sets a 6 percent limit. A credit above the cap or above your actual costs does not turn into cash for you. This page covers federal rules only. It is general information, not legal or financial advice.

FHA: interested party contributions

HUD Handbook 4000.1 defines interested parties as sellers, real estate agents, builders, developers, lenders, third-party originators and other parties with an interest in the transaction, and lets them contribute up to 6 percent of the sales price toward your origination fees, other closing costs, prepaid items and discount points (II.A.4.d.iii(G), HUD, Handbook update issued August 12, 2026, read October 30, 2026). The 6 percent limit also includes interested party payments for permanent and temporary interest rate buydowns, payments of mortgage interest on fixed rate loans, mortgage payment protection insurance, and the upfront mortgage insurance premium. Under the Handbook:

contributions above 6 percent, or above your actual origination fees, other closing costs, prepaid items and discount points, are treated as an inducement to purchase;
interested party contributions may not be used for your 3.5 percent Minimum Required Investment (MRI);
premium pricing credits from the lender or loan originator are left out of the 6 percent limit, as long as the lender or originator is not the seller, real estate agent, builder or developer;
real estate agent commissions or fees a seller pays under local law or local custom are not counted as a contribution; and
the lender must document the total contributions on the sales contract or other legally binding document, HUD form 92900-LT, and the Closing Disclosure.

The MRI rule comes from the National Housing Act, which bars the seller and anyone else who financially benefits from the transaction from providing the 3.5 percent cash investment (12 U.S.C. 1709(b)(9)(C), LII, read October 30, 2026). See mortgage gift funds rules for what can fund it.

FHA: what happens to an excess credit

The Handbook says inducements to purchase reduce the purchase price dollar for dollar when the lender figures the Adjusted Value of the home, before applying the loan-to-value limit (II.A.4.d.iii(H)). Its list of inducements includes contributions above 6 percent, contributions above your actual costs, decorating and repair allowances, moving costs, paying off consumer debt, and personal property. Replacing items such as a range, refrigerator, dishwasher, washer, dryer, carpeting or window treatments before settlement is not an inducement if no cash allowance is given to you. A smaller Adjusted Value means a smaller maximum loan.

VA: the 4 percent limit on seller concessions

VA’s Lenders Handbook says the seller, the lender or any other party may pay fees and charges, including discount points, for you, because VA’s limits apply to charges made against or paid by the veteran; the exception is excessive seller concessions (Chapter 8, Topics 4 and 5, VA, article updated July 9, 2026, read October 30, 2026). It defines a seller concession as anything of value the builder or seller adds to the transaction for which you pay nothing more and which the seller is not customarily expected or required to pay or provide. Its examples:

paying your VA funding fee;
prepaying your property taxes and insurance;
gifts such as a television set or microwave oven;
paying extra points for a permanent interest rate buydown;
escrowed funds for a temporary interest rate buydown; and
paying off credit balances or judgments for you.

Any concession or combination of concessions above 4 percent of the established reasonable value of the property is excessive and not acceptable for a VA-guaranteed loan. Normal discount points and payment of your closing costs are not counted toward the 4 percent. The Handbook’s example: if the market rate comes with two discount points and the seller pays five, three of them are a concession. For the fees a veteran may pay, see 38 CFR 36.4313 (eCFR, text up to date as of October 28, 2026) and the VA home loan funding fee.

USDA guaranteed loans

USDA will not issue a guarantee to buy a home if the seller or another interested third party contributes more than 6 percent of the sales price, unless the agency provides otherwise, toward your mortgage financing costs, closing costs, escrow accounts, furniture or other giveaways (7 CFR 3555.102(h), eCFR, text up to date as of October 28, 2026, read October 30, 2026). Costs the seller or another third party pays may not be included in the loan amount to be guaranteed (7 CFR 3555.101(b)(6)(xii), eCFR). USDA’s lender handbook (HB-1-3555) has more detail, but we could not retrieve it on the read date, so ask the lender how it applies the limit. See USDA rural home loan basics.

Example: the caps on one price

This example is only for the math, with an example price and costs, not terms from any lender. It assumes the appraised value or reasonable value equals the price.

Program	Cap	Cap on $300,000
FHA (sales price)	6%	$18,000
VA (reasonable value; normal points and closing costs not counted)	4%	$12,000
USDA (sales price)	6%	$18,000

FHA, a credit above actual costs. The seller agrees to an example credit of $20,000, but your actual origination fees, other closing costs, prepaid items and discount points are $14,000.

Item	Amount
Credit the lender can apply to your costs (the lesser of $20,000 and $14,000)	$14,000
Excess treated as an inducement: $20,000 − $14,000	$6,000
Price used for the Adjusted Value: $300,000 − $6,000	$294,000
Base loan at 96.5%: $294,000 × 96.5%	$283,710

The $14,000 applied is under the $18,000 cap. Asking for a lower price instead of a credit you cannot use is one question to raise with your agent.

VA, counting concessions. The seller pays an example $6,000 toward your VA funding fee and $3,000 of property taxes and insurance, plus $5,000 of your closing costs. The concessions are $6,000 + $3,000 = $9,000, which is $3,000 under the $12,000 limit; the $5,000 of closing costs is not counted.

Where seller credits show on the Closing Disclosure

Where	What it shows	Rule
Closing Cost Details (Loan Costs and Other Costs)	Each charge in a column for borrower-paid, seller-paid or paid by others	12 CFR 1026.38(f) and (g)
Summaries of Transactions, borrower side	A lump sum the seller gives toward loan costs, other costs or other seller obligations to you, labeled “Seller Credit”	1026.38(j)(2)(v)
Calculating Cash to Close	“Seller Credits” from the Loan Estimate next to the final amount, with “Did this change?”	1026.38(i)(7)
Summaries of Transactions, seller side	Closing costs the seller pays at closing	1026.38(k)(2)(iii)

Sources: 12 CFR 1026.38 (eCFR, text up to date as of October 28, 2026) and, for the Loan Estimate amount, 12 CFR 1026.37(h)(1)(vi) (eCFR). For how much your own closing costs may change between the two forms, see Loan Estimate closing cost limits; to judge whether points a seller pays are worth it, see mortgage discount points break-even.

A note on the citations

38 CFR 36.4313 lists the fees and charges a veteran may pay; it does not set the 4 percent limit, which is in the VA Lenders Handbook. The Handbook’s fee topic still refers to 38 CFR 36.4312, which in the current text is the interest rate section. The Handbook’s concession topic carries a change date of November 8, 2010, so it may be out of date; ask the lender which VA guidance it applies.

Questions to ask the lender

What is the cap on seller and other interested party contributions for this loan, in dollars?
Which of my costs count toward the cap, and which do not?
What are my actual closing costs, prepaid items and points, so the credit does not exceed them?
If the credit is more than I can use, how will the excess change the loan amount?
Where will the seller credit appear on my Loan Estimate and Closing Disclosure?

Checklist

Write the seller credit into the sales contract as a dollar amount.
Compare it with the cap for your loan type and with your actual costs.
Do not count on a seller credit for an FHA down payment.
Check the seller-paid column and the Seller Credit line on your Closing Disclosure.
Ask before you accept allowances for repairs, moving or furniture; they may reduce the loan.

To find housing counseling agencies that HUD has vetted, use the CFPB housing counselor search. You can submit a complaint at consumerfinance.gov/complaint.

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Sources

Disclosure: Modern Lending Solutions is not a lender, loan broker or agent for any lender or loan broker, and does not make credit decisions. Any compensation we receive is paid by participating lenders, only for advertising services. This guide is general information, not financial or legal advice.

Seller Concessions: How Much a Seller Can Pay on FHA, VA and USDA Loans