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Seller Concessions in Virginia: Limits by Loan Type

October 21, 2026
Seller Concessions in Virginia: Limits by Loan Type

A seller concession in Virginia is money the seller agrees to put toward the buyer's costs at closing, and the most you can ask for depends on the loan: 4% for VA loans, 6% for FHA, and 3%, 6% or 9% for conventional loans on a primary home, depending on your down payment. Below, we show how each cap works, what counts against it, how to write it into a Virginia REALTORS contract, and when asking is smart or a mistake.

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TL;DR

  • The cap is set by your loan program, not by Virginia law. VA loans allow 4% of the home's reasonable value, FHA allows 6%, and conventional limits run from 2% to 9%.
  • Not every closing cost counts against the cap. On VA loans, customary costs such as appraisal and title fees sit outside the 4%.
  • Concessions are a negotiation, not a gift. Sellers often price them in, and a low appraisal can unravel the plan.
  • In the Virginia REALTORS contract, put concessions and seller-paid settlement costs in their correct paragraphs so the dollars are not doubled or lost.
  • Leftover seller money cannot be paid to you as cash.

Table of Contents

What a seller concession actually is

Fannie Mae describes these as contributions from parties with a vested interest in the transaction, used for costs that are normally the buyer's. In practice the seller agrees in the purchase contract to pay some of your closing costs, prepay items such as taxes and insurance, or fund a rate buydown. The money is credited at settlement, so you bring less cash to the table.

The seller still nets less, which is why concessions are negotiated like any other term. If you want a feel for the total you are trying to reduce, our guide to Virginia closing costs breaks down a typical cash-to-close figure.

The limits by loan type

Lenders cap concessions because a seller who pays too much can inflate the price, which shifts risk onto the loan. Each program sets its own ceiling.

Loan typeSeller concession capBased on
VA4%The home's reasonable value on the Notice of Value
FHA6%The lesser of sales price or appraised value
Conventional, primary home, LTV over 90%3%Sales price or appraised value, per the guide
Conventional, primary home, LTV 75.01% to 90%6%Same
Conventional, primary home, LTV 75% or less9%Same
Conventional, investment property2%Any LTV

Sources: VA, HUD Handbook 4155.1, Fannie Mae Selling Guide. Freddie Mac publishes its own interested party contribution rules, so confirm your lender's overlay before you write a number into an offer.

What this looks like in dollars

Take a $400,000 Virginia home that appraises at the price. These are the ceilings, before your lender applies anything stricter:

  • VA: 4% is $16,000 of true concessions, plus the customary seller-paid costs outside the cap.
  • FHA: 6% is $24,000.
  • Conventional with 5% down (95% LTV): 3% is $12,000.
  • Conventional with 20% down (80% LTV): 6% is $24,000.
  • Conventional with 30% down (70% LTV): 9% is $36,000.

Those are ceilings, not targets. Most buyers do not need anywhere near the maximum, and a smaller ask is easier to win.

Why down payment drives the conventional limit

The conventional tiers rise as your equity rises, because a larger down payment leaves the lender less exposed. If you are weighing how much to put down, that trade-off matters: a smaller deposit leaves less room for seller help. Lenders abroad treat deposit size in a similar way, as this UK explainer on how different deposits affect new-build mortgages shows, though UK rules differ from American ones.

VA loans: the 4% rule and what counts toward it

The VA says it does not limit credits for a loan's closing costs, but it does limit seller concessions to 4% of the home's reasonable value. That distinction is the most misunderstood part of VA financing in Virginia, a state with a large veteran and military population.

Per the VA, items that count toward the 4% include:

  • The VA funding fee, when the seller pays it
  • Prepaid property taxes and hazard insurance (escrow setup)
  • Payoff of the buyer's debts
  • Discount points

The VA's own credit standards course lists the same short set of items for the 4%. Normal, customary closing costs such as appraisal and title fees do not count toward it.

The VA notes that you and the seller can negotiate who pays costs such as your real estate professional's commission and fees, the loan origination fee and credit report charges. The VA Buyer's Guide confirms that VA policy lets sellers, lenders or other parties pay loan fees and charges on a borrower's behalf.

The practical upshot: a VA buyer can often get a seller to cover most customary closing costs and then still ask for up to 4% in true concessions. That is a bigger package than the headline number suggests.

FHA loans: 6% and a dollar-for-dollar rule

FHA allows up to six percent of the sale price in seller concessions, and those funds can never serve as the down payment. HUD's handbook describes the same six percent interested party limit.

If contributions exceed the limit, the excess is treated as an inducement to purchase. The sales price used to calculate the loan-to-value ratio is then reduced dollar for dollar, which shrinks the loan you can get. Say the cap on your $400,000 purchase is $24,000 and the contract promises $28,000. The extra $4,000 reduces the value the lender uses, and you would need to make up that difference in cash.

Conventional loans: the three tiers

For a conventional loan on a primary residence, the Fannie Mae limits are 3% above 90% LTV, 6% from 75.01% to 90%, and 9% at 75% or less. Investment properties are capped at 2% regardless of LTV. Investors who plan to ask for a credit on a rental purchase should price that lower ceiling into their numbers from the start.

Conventional seller concession caps by loan type

Concessions are a negotiation, not free money

A concession costs the seller real dollars, so expect a seller to ask what they get in return. Common outcomes:

  1. The seller raises the price. A $10,000 credit may arrive with a $10,000 higher price. That works only if the home appraises at the higher figure.
  2. The seller declines. In a market with several offers, a credit request can make your bid look weaker than a clean one.
  3. The seller counters smaller. This is the usual result: a partial credit, or one tied to repairs found at inspection.

The appraisal is where the plan breaks. When a price is raised to fund concessions and the appraisal comes in below it, the strategy can collapse, leaving the buyer to cover the gap or renegotiate. Read our piece on Virginia appraisal waivers for how appraisal rules affect your risk, and on non-contingent offer risks before you waive protections to look stronger.

Writing it into a Virginia REALTORS contract

Virginia REALTORS has addressed a common mix-up in the VAR contract: entering $5,000 in both paragraph 2(d) and paragraph 9(b) and asking whether the seller owes $10,000. The practical guidance is to keep the two paragraphs distinct. Paragraph 9(b) is for seller-paid settlement and closing costs. Other seller contributions, such as buyer-broker compensation or repair credits, belong in the concession field. Whatever you choose, tell your agent exactly what total the seller is committing to, and check that the lender's loan estimate matches it.

On agent pay, the VA notes that buyer's agent compensation can be negotiated between buyer and seller following recent industry changes. If a seller pays your agent through a concession, it counts as a seller contribution under your loan program's rules, so ask your lender how it will be treated before you submit the offer.

Rules that catch buyers out

  • No cash back. Seller contributions pay allowed costs. They cannot become cash to you. USDA's guidance says a tax credit at closing may pay closing costs but cannot result in cash back. Leftover funds are typically applied to the loan or returned to the seller.
  • Not a down payment. On FHA, concession funds cannot be the buyer's down payment.
  • Customary costs are different from financing concessions. On VA loans, normal costs such as title and recording fees fall outside the 4% cap, so a seller can often do more than the headline limit implies.
  • Your lender has the final word. Program rules set the maximum, but the lender's underwriter approves the final numbers.

Our perspective

We see the same mistake in offers: buyers ask for a round-number credit without knowing which loan cap applies or what the seller will net. We start with the buyer's cash-to-close estimate, ask the lender which costs count against the cap, and only then decide how much to request.

For sellers, our advice is to treat a concession request as a price conversation. Run the numbers on a net sheet and compare the offer with a slightly lower price and no credit. A higher net does not always come from the higher headline number. If you are weighing offers, our offer review guide covers deadlines and seller duties.

Clear communication is what we promise our clients, and concessions are where it matters most: everyone should know the dollar figure, the paragraph it lives in, and what the appraisal must support before the contract is signed.

— Myra

For sellers: how to respond to a concession request

If you are listing a home, you will see these requests, especially from VA and FHA buyers. A few ways to handle them:

  1. Calculate your true net. Closing costs for sellers can reach 2% to 5%, and a concession is on top of those. Our transfer tax and closing checklist shows the Virginia-specific items.
  2. Do not assume VA or FHA buyers are a problem. Some sellers worry about loan-program flags and repair requirements. Prepared properly, these offers close well, as we cover in our guide to selling in winter.
  3. Trade, do not just concede. Counter with a smaller credit, a firmer closing date or a shorter inspection window.
  4. Check the appraisal risk. If a credit is paired with a higher price, ask how the buyer plans to handle a low appraisal.

Condition matters too: a home that shows well draws stronger offers with fewer credit requests, and low-cost curb appeal fixes can help.

Work with us on your Virginia purchase or sale

Whether you are structuring an offer with a credit or weighing one as a seller, we help you put real numbers behind the decision. Buyers can start with our home buying service, sellers can see how we sell your home, and you can request a home valuation to see what a realistic net looks like before you negotiate.

FAQ

What is the VA seller concession rule?

The VA limits seller concessions to 4% of the home's reasonable value shown on the Notice of Value. The 4% covers items such as the funding fee, prepaid taxes and insurance, debt payoffs and discount points. Customary closing costs such as appraisal and title fees sit outside it.

How much can a seller give in concessions?

It depends on the loan. The limit is 4% on VA loans and 6% on FHA loans. On conventional primary-home loans it is 3%, 6% or 9% depending on LTV, and 2% on investment properties. Your lender confirms the final figure.

What does $5,000 in seller concessions mean?

The seller agrees to pay up to $5,000 of your allowed closing costs, which lowers the cash you bring to settlement. It does not hand you $5,000 in cash. If the costs the credit can cover add up to less than that, the unused portion is not paid to you.

What closing costs do sellers pay in Virginia?

Sellers typically pay the agent commission they agreed to, their own title and settlement-related items under the contract, and transfer-related taxes, as our guide on Virginia transfer taxes explains. What is split between the parties is negotiable and set in the contract.

Sources