By Justin Pierce (JP) | Branch Manager / Certified Mortgage Advisor
Gold Star Mortgage Financial Group | November 2, 2026A seller offers a $15,000 credit. Does that mean you need $15,000 less at closing? Only if your eligible costs are that high and the credit fits your loan program. Any unused amount does not simply become cash, a down payment, or reserves.
Quick answer: Seller credits can pay eligible closing costs, prepaid expenses, and certain discount points or permitted interest-rate buydowns. They generally cannot provide a conventional loan's required down payment or reserves. The usable amount is limited by both the program cap and the borrower's actual eligible costs. The exact rule depends on the loan program, occupancy, and loan-to-value ratio.
What conventional guidelines allow
Fannie Mae calls a seller credit an interested party contribution. Its current guide allows these funds for borrower closing costs, including prepaid items, and up to 12 months of homeowners association assessments. It expressly prohibits using the contribution for the down payment, minimum borrower contribution, or financial reserves.[1] Freddie Mac's rules, effective July 1, 2026, follow the same basic structure for financing concessions.[2]
For a conventional loan sold to Fannie Mae or Freddie Mac, the maximum financing-concession percentages for a primary residence or second home are shown below. Investment-property financing concessions are capped at 2 percent across the listed loan-to-value ranges.[1][2]
Primary or second home Above 90 percent 3 percent
Primary or second home Above 75 to 90 percent 6 percent
Primary or second home 75 percent or below 9 percent
Investment property Any listed ratio 2 percent
The percentage is only one ceiling
Consider a $500,000 primary residence with 5 percent down. The loan-to-value ratio is 95 percent, so the conventional cap is 3 percent, or $15,000. If the buyer has only $11,000 of eligible closing costs and prepaid items, the useful credit under that structure is $11,000. The remaining $4,000 does not become cash for the buyer or fill the down-payment requirement.
The Consumer Financial Protection Bureau explains that Estimated Cash to Close includes the down payment and closing costs, minus the deposit, seller credits, and other adjustments. That separation is visible on the Loan Estimate.[3] Before signing an offer, ask for a current estimate of eligible costs. Then confirm that the purchase contract, Loan Estimate, and final Closing Disclosure show the credit consistently.
Why this matters when you own a business
A well-sized seller credit can reduce the personal cash needed for closing. That may help a business owner avoid an unnecessarily large withdrawal from operating funds. It still does not satisfy a conventional reserve requirement; Fannie Mae lists interested party contributions as an unacceptable reserve source.[4]
If business assets will fund the down payment, closing costs, or reserves, the lender may need more than proof of the account balance. When self-employment income is also used to qualify, Fannie Mae requires a cash-flow analysis to confirm that the withdrawal will not harm the business.[5] Coordinate the credit and asset plan before moving money between accounts.
Government loans use different rules
Do not apply the conventional percentage table to every loan. FHA and VA have their own definitions, eligible uses, and limits.[6][7] A credit that works under one program may need a different structure under another. The lender should review the sales contract and the full cost worksheet before the offer becomes final.
A practical offer checklist
Compare a price reduction, closing-cost credit, and permitted rate buydown using the same purchase price and loan assumptions.
Size the requested credit against a current cost estimate, not a round number alone.
Confirm the program cap, eligible uses, and treatment of any amount above actual costs.
Keep the down-payment and reserve sources documented separately from the seller credit.
The bottom line
Seller credits can make the cash-to-close calculation easier, especially for a buyer who wants to preserve working capital. Their value comes from matching the credit to real, eligible costs. They do not erase the need for an acceptable down payment or documented reserves.
Which would help you more when comparing offers: a lower price, a credit toward closing costs, or a rate buydown? Leave a comment with your preference, without sharing private financial details. Subscribe to Beyond the Rate, and call JP for a mortgage strategy session before writing the offer.
Sources for the article[1] Fannie Mae Selling Guide B3-4.1-02, Interested Party Contributions, dated May 7, 2025[2] Freddie Mac Single-Family Seller Servicer Guide Section 5501.6, effective July 1, 2026[3] Consumer Financial Protection Bureau, Loan Estimate Explainer, last modified October 29, 2025[4] Fannie Mae Selling Guide B3-4.1-01, Minimum Reserve Requirements, dated August 7, 2024[5] Fannie Mae Selling Guide B3-3.5-01, Underwriting Factors and Documentation for a Self-Employed Borrower, dated December 13, 2023[6] U.S. Department of Housing and Urban Development, FHA Single Family Housing Policy Handbook 4000.1, update published August 12, 2026[7] U.S. Department of Veterans Affairs, VA Home Loans Loan Fees, last updated May 26, 2025