Maximum Seller Concessions & Rate Buydowns

Seller concessions are now the thing! Before the market turns, it is likely that you can get a rate buydown from seller. But, as always, there is. bit of a catch. There are maximums that most conventional loan programs will allow the seller to concede on any sale. Primarily they have to be centered around closing costs (they can't just be a gift because they like you - they can lower the price if that's the deal). Rate buydowns are the most popular concession currently.

So here's the limits for maximum seller concessions that can be used for closing costs (rate buydowns are considered a part of closing costs):

• FHA – 3%
• VA – 4% (not all closing costs are included, so concessions can be higher)

With a non-FHA/VA loan (a conventional loan), max Concession amount based on down payment:

• 3% with 10% down
• 6% with 10% to 25% down
• 9% with 25% and above

The seller’s concession cannot be more than the closing costs and when the concession is included, the sales price must be aligned with the appraisal.

Rate buydown prices vary by lender (often more widely than the actual interest rate they charge) so shopping around is a good idea.

How much does it cost?

You can expect to pay about 4% of the loan amount to buy down one point on the interest rate.  If the home has been on the market awhile, the seller will likely help out on that cost - and it allows you to buy the home at a price that is lower than the price it will be once the interest rates go down.