Seller credits show up in most Florida offers, and they’re a common reason files get restructured late. Each loan program has its own cap, its own list of what counts, and its own way of handling the excess. Below is what each current guide says.
Key takeaways
- FHA: up to 6% of the sales price, and never more than the buyer’s actual closing costs, prepaids and discount points (HUD Handbook 4000.1, II.A.4.d.iii(G)).
- Conventional: 3%, 6% or 9% by LTV for a primary residence or second home; 2% for an investment property (Fannie Mae B3-4.1-02; Freddie Mac 5501.6).
- VA: concessions over 4% of reasonable value are excessive, but normal closing costs and market-rate points paid by the seller don’t count (VA Pamphlet 26-7, Ch. 8, Topic 5).
- USDA: 6% of the sales price, toward eligible loan purposes only (HB-1-3555, 6.2.C).
- On FHA and conventional loans, any credit over the cap or over the buyer’s real costs is subtracted from the price before the LTV is calculated.
Who is an “interested party”
All the guides define this broadly: the seller, builder or developer, the real estate agents and brokers, and anyone affiliated with them. HUD also lists the lender and the third-party originator. A credit from either agent counts against the same cap as a credit from the seller. So does money that passes through a nonprofit or other third party if it started with an interested party.
FHA: 6% of the sales price
HUD 4000.1 II.A.4.d.iii(G) lets interested parties pay up to 6% of the sales price toward the borrower’s origination fees, other closing costs (including items paid outside closing), prepaids and discount points. The 6% also covers rate buydowns and payment supplements, mortgage interest payments on fixed-rate loans, mortgage payment protection insurance, and the upfront MIP.
Not counted: real estate commissions the seller typically pays by local custom or law, and lender premium-pricing credits, unless the lender is also the seller, agent, builder or developer. None of the money can go toward the buyer’s 3.5% minimum required investment.
Over the limit: anything above 6%, or above actual costs, is an “inducement to purchase” (II.A.4.d.iii(H)). Decorating and repair allowances, moving costs, paying off consumer debt and personal property are inducements too. Each one reduces the purchase price dollar for dollar when the Adjusted Value is calculated (II.A.2.a), and the maximum loan amount comes from that number.
Conventional: by LTV and occupancy
Fannie Mae and Freddie Mac use the same grid. It’s calculated on the lower of the sales price or the appraised value, not the loan amount:
| Occupancy | LTV/CLTV over 90% | 75.01% to 90% | 75% or less |
|---|---|---|---|
| Primary residence or second home | 3% | 6% | 9% |
| Investment property | 2% | 2% | 2% |
The money can pay closing costs (including prepaids) and up to 12 months of HOA dues. Fees the seller customarily pays by local custom fall outside the cap. So does a prorated tax credit where taxes are paid in arrears, which is the case in Florida, where taxes come due November 1 for the current year. Cash, gift cards, furniture, decorator allowances and agent rebates are sales concessions. They come off the price, and so does any credit above the cap or above the buyer’s actual closing costs. Then the LTV is recalculated. Credits paid outside closing and left off the settlement statement make the loan ineligible.
A rate buydown paid for by the seller counts toward the cap on both FHA and conventional loans. See our discount points vs. lender credits guide.
VA: 4%, and what isn’t counted
Veterans Day is this week, so it’s a good time to get this rule right for the veterans you’re helping buy. VA Pamphlet 26-7, Chapter 8, Topic 5, defines a concession as anything of value the seller adds that the buyer doesn’t pay for and that the seller isn’t customarily expected to pay. Concessions over 4% of the established reasonable value are “excessive, and unacceptable.”
These count toward the 4%: the VA funding fee, prepaid property taxes and insurance, gifts, extra points for a permanent buydown, escrowed funds for a temporary buydown, and paying off the buyer’s debts or judgments.
These don’t count: the seller paying the buyer’s closing costs, or discount points in line with the market. VA’s example: if the market rate carries two points, the seller paying two is not a concession, but if the seller pays five, three are. VA also doesn’t treat the seller paying the buyer’s broker as a concession (Circular 26-24-14). As a result, a VA buyer can often get more total seller help than “4%” suggests. See our VA loans in Florida guide.
USDA: 6% toward eligible costs
HB-1-3555, section 6.2.C, caps seller and interested-party contributions at 6% of the sales price, and the money has to go to an eligible loan purpose. Lender premium pricing doesn’t count toward the cap, and neither does seller money for repairs or the buyer’s real estate commission. Repair funds do have to be escrowed. The money can’t pay the buyer’s personal debt or buy movable personal property like furniture or cars. Household appliances that normally convey are allowed.
Comparison at a glance
| Loan | Cap | Based on | Not counted | If over |
|---|---|---|---|---|
| FHA | 6% | Sales price | Customary seller-paid commissions; lender premium pricing | Reduces price dollar for dollar |
| Conventional | 2% to 9% | Lower of price or value | Customary seller-paid fees; tax proration in arrears | Deducted from price; LTV recalculated |
| VA | 4% (concessions only) | Reasonable value | Normal closing costs; market-rate points; buyer-broker fee | Unacceptable: restructure |
| USDA | 6% | Sales price | Premium pricing; escrowed repairs; buyer’s commission | Restructure |
Offer-writing checklist
- Confirm the loan type and down payment first. A 3%-down conventional buyer is capped at 3%. On FHA, the same buyer can get 6%.
- Get the lender’s estimate of closing costs plus prepaids. A credit bigger than the buyer’s real costs doesn’t turn into cash.
- Word it as a credit toward closing costs, prepaids and escrows, not cash to the buyer or a repair allowance.
- If you raise the price to cover the credit, the appraisal still has to support it. The appraiser receives the contract with the concessions. If the value comes in short, see low appraisal options.
- Put every credit in the contract and on the Closing Disclosure. No side deals.
- Know who customarily pays what. See Florida closing costs: who pays what and our doc stamps and intangible tax breakdown. Prepaid insurance can be large, including any required flood policy (flood insurance basics).
- Size repair requests from the report. See how to read a Florida inspection report, then ask the lender how a repair credit will be treated.
FAQ
Can a seller credit cover the down payment?
No. Fannie Mae bars interested-party money from the down payment, reserves and minimum borrower contribution. FHA bars it from the 3.5% minimum investment.
What happens to the part of the credit the buyer can’t use?
On FHA and conventional loans, it’s treated as an inducement or sales concession and comes off the price. Ask the lender early so the contract can be amended before closing.
Does seller-paid buyer’s agent compensation count?
FHA excludes commissions the seller customarily pays, VA doesn’t treat seller-paid buyer-broker charges as a concession, and USDA excludes seller money for the buyer’s commission. Conventional rules exclude fees the seller customarily pays locally. The lender decides whether a specific fee qualifies.
Is VA’s 4% less generous than FHA’s 6%?
Not necessarily. VA’s 4% only applies to items like the funding fee, prepaid taxes and insurance, buydowns and debt payoffs. Normal closing costs and market-rate points sit outside it.
Talk through an offer before you write it
If you want a credit sized to your buyer’s loan type and real costs, call me at 407-476-6667. Buyers can apply or get pre-approved at orlandorebroker.com. All loans are subject to underwriting and current program guidelines.
Tariq AbouAdma, Mortgage Loan Officer NMLS 2724176 · Loan Factory NMLS 320841 · Equal Housing Opportunity
General education, not legal or tax advice. Your lender and the current program guide govern your transaction.
Sources
- HUD Handbook 4000.1 (revised 8/12/2026): II.A.4.d.iii(G), II.A.4.d.iii(H), II.A.2.a
- Fannie Mae Selling Guide B3-4.1-02
- Freddie Mac Guide 5501.6 and 4203.1(a)
- VA Pamphlet 26-7, Chapter 8, Topics 4-5; VA Circular 26-24-14
- USDA HB-1-3555, Chapter 6, 6.2.C
- Florida Statutes 197.333 (when property taxes are due)