How FHA Seller Concessions Can Help You Buy a House

Home buyers celebrating their home purchaseBuying a home can be a stressful and time-consuming process. You have to navigate through the mortgage process and secure financing. Many people do not know that the haggling process between the buyer and seller can be used to your advantage. One strategy that can be used is known as FHA seller concessions.

FHA seller concessions are when a seller agrees to pay the buyer's closing costs to help them get approved for an FHA loan. This can be a great way for buyers to reduce their upfront costs and close successfully. In this article, we will look at what FHA seller concessions are, the limitations of seller concessions, the advantages and disadvantages of using seller concessions, and more.

Explanation of FHA Seller Concessions

If you are looking to buy a home and don't have enough money for the down payment, closing costs, or other fees, then FHA seller concessions could be a good option. But what exactly are FHA seller concessions? 

FHA seller concessions are an agreement between the seller and buyer that allows the seller to pay some (or all) of the buyer's closing costs. The concessions cover anything from loan origination fees to prepaid expenses like property taxes, appraisals, and homeowner's insurance. 

Sellers would agree to pay these fees because it makes their home more attractive to buyers who may not have enough cash on hand for all of these expenses. Furthermore, FHA loans tend to be more lenient regarding credit score requirements than conventional loans – allowing more buyers access to homeownership.

Limits on Seller Concessions

FHA seller concessions can be a great benefit for both buyers and sellers in a real estate transaction. However, there are some limitations that buyers and sellers should be aware of before agreeing to these concessions. One limitation is the maximum amount of concessions that the seller can offer. The current limit is 6% of the home’s sale price, which means that if the home sells for $200,000, the most a seller can offer in concessions is $12,000.

Another limitation of FHA seller concessions is that they cannot exceed the actual closing costs and prepaid costs incurred by the buyer. If a buyer’s total closing costs are only $8,000, the maximum seller concessions they can receive is also $8,000. Additionally, certain fees, such as appraisal and credit report fees, cannot be included in seller concessions.

Advantages of Using Seller Concessions

Seller concessions are attractive for buyers seeking extra assistance when purchasing a new property. They offer numerous often overlooked benefits, enabling you to save money and simplify the home-buying process. Let's explore these advantages in more detail.

Primarily, seller concessions can help lower your closing costs. The seller may consent to cover some or all of the fees associated with closing on the property, such as title insurance and transfer taxes. This is particularly beneficial if you are short on cash after the down payment or wish to allocate more funds toward renovations or other expenses.

Furthermore, using seller concessions can strengthen your negotiating position. If you are competing with other buyers and have requested seller concessions, this might make your offer stand out from the competition. When the seller pays these costs, it highlights the advantages of your proposal.

Moreover, the seller can contribute to your closing costs by agreeing to pay a certain percentage of the loan amount. This percentage may vary depending on the lender and the loan type. Consult with your real estate agent and lender to determine the maximum amount the seller can pay based on your loan type.

When asking for seller concessions, it's essential to discuss the subject with your real estate agent, who can guide the appropriate amount to request. In some cases, buyers may be able to include upfront mortgage insurance in the concessions, which could help reduce their overall costs.

In conclusion, seller concessions offer a range of benefits to buyers who may need assistance during the home-buying process. From lowering closing costs to strengthening your negotiating position, these concessions can play a vital role in helping you secure your dream home.

Disadvantages of Using Seller Concessions

Seller concessions, commonly called seller contributions or seller-paid closing costs, are incentives home sellers offer to attract potential buyers. These concessions can be in the form of a reduction in the purchase price or payment of certain closing costs. Although they may seem attractive to buyers, several disadvantages are associated with using seller concessions.

One major disadvantage of using seller concessions is that it can increase the overall home cost. While these concessions may initially provide some financial relief, they can ultimately result in higher monthly mortgage payments. Additionally, accepting seller concessions may limit a buyer's negotiating power during the transaction process and could lead to fewer options when searching for homes within their budget.


In conclusion, FHA seller concessions are a valuable resource for buyers when reducing the closing costs of purchasing a home. They enable borrowers to lower the overall expense of their mortgage and can even be utilized for covering down payments. Buyers can make the most of this excellent option by grasping how seller concessions work when they discover a property they want to buy. Nonetheless, it is essential to remember that not all sellers are ready or able to offer concessions.

Buyers generally employ FHA seller concessions to negotiate for sellers to pay closing costs, making the purchase more affordable. The seller concessions cover a range of expenses, such as loan closing costs and other related fees. Since seller concessions are closing costs the seller agrees to absorb, this can be a significant advantage for potential buyers.

In a competitive market, a seller is more likely to consider offering seller concessions as part of the deal. With that said, it is important to note that there are seller concession limits to regulate the amount they can cover. Fortunately, seller concessions are common, making it easier for buyers to negotiate these terms.

In conclusion, understanding how seller concessions work and their potential benefits can greatly assist buyers in lowering their overall mortgage costs. While not every seller may be able or willing to offer concessions, being informed and prepared to negotiate can prove vital in securing a favorable deal.