Can the Seller Pay Closing Costs on a Conventional Loan?
Asking the seller to cover some of your closing costs is a common negotiating strategy — and it is fully allowed on conventional loans. But there are firm limits on how much they can contribute, and exceeding those limits can create problems at closing.
What are seller concessions?
Seller concessions — called interested party contributions (IPCs) under agency guidelines — are funds the seller, builder, or real estate agent contributes toward the buyer’s closing costs. They can cover lender fees, title fees, prepaid interest, escrow deposits, and other allowable costs. They cannot be used to make the down payment.
Maximum seller concession limits
| Property / Occupancy | LTV / CLTV | Max Seller Contribution |
|---|---|---|
| Primary residence or second home | Greater than 90% | 3% |
| Primary residence or second home | 75.01%–90% | 6% |
| Primary residence or second home | 75% or less | 9% |
| Investment property | All LTV/CLTV ratios | 2% |
What happens if the seller contributes too much?
Excess contributions above the allowable limit must be deducted from the purchase price for underwriting purposes. This reduces the value the lender uses, which can affect your LTV and loan eligibility. Structure the contract correctly from the start.
How to use seller concessions strategically
In a buyer’s market or when a property has been sitting, asking for 2–3% in seller concessions is a reasonable negotiating tool. On a $750,000 purchase with a 5% down payment (90.1% LTV), the seller can contribute up to 3% — that is $22,500 toward your closing costs, making a significant difference in cash needed at closing.
Key takeaways
- Seller contributions are capped at 3%, 6%, or 9% depending on LTV — lower LTV allows more.
- Investment properties are limited to 2% seller contribution at all LTV levels.
- Excess contributions above the limit must be deducted from the purchase price.
- Seller concessions can cover closing costs and prepaids — but not the down payment.
- On a 90%+ LTV primary residence purchase, the max seller contribution is 3% of the price.
- Combining seller concessions with DPA programs can significantly reduce out-of-pocket costs.
Ready to explore your conventional loan options? Lendia can walk you through what you qualify for and find the right program for your goals.