In many housing markets, sellers may be more willing to offer incentives to attract buyers—especially when homes are sitting on the market a little longer than usual. One of the most effective ways to take advantage of this as a buyer is through a seller concession—where the seller agrees to cover certain buyer costs at closing.

Before you negotiate, it’s helpful to know what your financial priorities are. Are you trying to keep your upfront costs low? Do you want to reduce your monthly mortgage payments early on? Or are you most focused on getting the lowest possible interest rate over the life of your loan?

Seller concessions can be structured to meet different needs. Here’s a breakdown of how they work—and how they might benefit you.

Keeping Cash to Close as Low as Possible

If your income is strong but you don’t have a lot of savings to put toward closing, a seller concession can be used to cover your closing costs. That means the only money you’ll need to bring to closing is your down payment. This strategy helps reduce the upfront cash required to buy a home and can make the process more accessible for buyers who are financially stable but cash-limited.

Lowering Payments in the Early Years

If you’re expecting a raise, promotion, or other income change in the near future, you might want to focus on lowering your monthly payments in the early years of your loan. In that case, a seller concession can be used to pay for a temporary interest rate buydown, reducing your mortgage payments during the first year or two. This can help ease your transition into homeownership while giving you time to grow into your full monthly payment.

Getting the Lowest Long-Term Interest Rate

For buyers planning to stay in their home long-term, using a seller concession to permanently buy down the interest rate can result in significant savings over time. A lower interest rate means a lower monthly payment—and less paid in interest over the life of the loan.

How Much Can a Seller Contribute?

The amount a seller can contribute depends on the loan type and your down payment. Conventional loans backed by Fannie Mae or Freddie Mac typically allow:

  • Up to 3% in concessions if you’re making a minimum down payment
  • Up to 6% if you’re putting down more

Seller concessions can be applied toward closing costs, interest rate buydowns (temporary or permanent), or prepaid mortgage insurance. They cannot be used to reduce the required down payment itself.

Why It Matters: Concession vs. Price Reduction

Many buyers assume a price reduction is the best way to save money, but a well-structured seller concession can often have a greater impact on your monthly payment and total cost of borrowing. Likewise, sellers may benefit from offering concessions as a way to attract more interested, qualified buyers.

Understanding the difference—and knowing how to structure the deal—can help both sides come out ahead.

Final Thoughts

Every buyer’s financial picture is different, and the right strategy depends on your long-term goals. Working with a knowledgeable lender and real estate agent is key to making seller concessions work in your favor.

If you have questions or want help reviewing your options, our mortgage professionals are here to help you find the solution that fits your needs.

Need a Mortgage Loan Specialist? Call our office at (303) 394-2121 anytime.

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