How Much Can a Seller Pay Toward a Buyer's Costs in Massachusetts?

A seller can usually contribute between 3% and 9% of the price toward a buyer's costs, depending on the loan type and the down payment. That money, called a seller concession or seller credit, can pay for closing costs, prepaid items, or a rate buydown. It can't go to the buyer as cash, and it can't be more than the buyer's actual costs.

In this market, credits come up on almost every deal I'm part of. Knowing the limit before you negotiate saves everyone a surprise from the lender.

What are the limits by loan type?

For a primary residence, these are the standard maximums:

• Conventional, less than 10% down: up to 3% of the price.
• Conventional, 10% to under 25% down: up to 6%.
• Conventional, 25% or more down: up to 9%.
• FHA, any down payment: up to 6%.
• VA: up to 4% in concessions, plus the buyer's normal closing costs.
• USDA: up to 6%.

Investment properties have lower limits, usually 2% on a conventional loan. Lenders can set their own rules on top of these, so always confirm with the buyer's lender.

What can a seller credit pay for?

• Closing costs: lender fees, title, attorney, recording.
• Prepaid items: property taxes and homeowners insurance set up at closing.
• A rate buydown: temporary or permanent, to lower the buyer's monthly payment. Here's how buydowns work.

If the credit is larger than the buyer's actual costs, the extra doesn't go to the buyer. The deal usually gets rewritten with a lower credit or a lower price.

Is a credit better than a lower price?

Often, for the buyer's monthly payment. A $10,000 price cut barely changes the payment. The same $10,000 as a credit toward a buydown or closing costs can make a real difference in what the buyer pays each month and how much cash they need to close.

For sellers, a credit can also protect the sale price, which matters for the appraisal and for the next sale in the neighborhood.

How do you use credits well?

1. Run the numbers with the lender first. Know the buyer's limit and their actual costs before you put a number in the offer.
2. Say what the credit is for. "A credit of X toward closing costs and a 2-1 buydown" is clearer than a lump sum.
3. Compare offers on net, not price. An offer with a higher price and a big credit can net the seller less than a lower, clean offer.

Questions people actually ask.

What is a seller concession?

Money the seller agrees to pay toward the buyer's closing costs, prepaid items or a rate buydown. It reduces what the seller nets from the sale.

Can a seller pay all of my closing costs?

Sometimes, if the costs fit within your loan's limit. On a conventional loan with less than 10% down, the cap is 3% of the price.

Can a seller credit be used for a down payment?

No. Seller credits can't be used toward your down payment or given to you as cash.

Do seller concessions affect the appraisal?

The home still has to appraise at the contract price. Large credits can draw a closer look, which is why the price and credit should be supported by the market.

General information, not a loan offer. Guidelines change, and every lender can add its own rules. Confirm with a licensed loan officer.

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This article is general information about Massachusetts real estate, not legal, tax, or financial advice. Every property and transaction is different. For advice on your situation, talk with me and, where appropriate, an attorney, lender, or tax professional.