What a concession is

It's a credit from the seller that shows up in your REPC and on your settlement statement. It can cover your closing costs, prepaid items like taxes and insurance, or the cost of lowering your rate. In a slower market like this one, requests in the $10,000 to $20,000 range are pretty common.

Two rules surprise people. A concession can't pay your down payment, and it can't count for more than your actual closing costs.

How much your loan allows

Your loan sets the ceiling. Under Fannie Mae's rules for a home you'll live in, the seller can cover up to 3% with less than 10% down, 6% with 10% to just under 25% down, and 9% with 25% or more. FHA allows 6% of the sales price, per HUD's current handbook, and that includes any buydown.

Those conventional tiers are really based on your total loan-to-value, so a second loan like down payment assistance can drop you to the 3% tier. VA and other loans have their own rules, and lenders can be stricter. Confirm the exact number for your loan with your lender before we write the offer.

Permanent vs. temporary buydowns

A permanent buydown means paying discount points at closing for a lower rate on the whole loan. A temporary buydown lowers your payment for the first year or two, then it goes to the full rate. The common version is a 2-1: 2 percentage points lower in year one, 1 point lower in year two.

Here's the catch with a 2-1. Under Fannie Mae's rules, lenders still qualify you at the full rate, so it makes the first two years easier but doesn't help you afford more house. And I wouldn't count on refinancing before year three. Nobody, including me, can tell you where rates will be by then.

A quick example

Example only, rounded: a $500,000 home with 5% down is a $475,000 loan. At 7.25% (close to Freddie Mac's 7.24% average on October 29, 2026), principal and interest alone is about $3,240 a month. A 2-1 buydown costs the seller roughly $11,200 (within the 3% limit) and drops that to about $2,620 in year one and $2,925 in year two. A bigger $15,000 price cut, by comparison, lowers the payment by only about $97 a month.

Both sides of the table

For a seller, $15,000 is $15,000 whether it's a price cut or a credit. For a buyer it's a different story, because the credit can lower the rate or cover cash you'd otherwise bring to closing. That's why I think sellers in this market should expect the request and plan for it, not take it personally.

A price cut still makes sense sometimes. If the appraisal comes in low, or you're paying cash, or you plan to stay long enough that a lower loan balance matters more, the price may be the better lever.

What I'd actually recommend

If you're buying, ask your lender to price three versions side by side: a credit toward points, a 2-1 buydown, and a straight price reduction. Then compare them over how long you'd realistically keep the loan. If you're selling, decide your bottom-line net before offers come in, so you're not deciding it on the spot.

Quick answers

Can seller concessions pay for my down payment?

No. Under Fannie Mae and FHA rules, seller credits can go toward closing costs, prepaid items and buydowns, but not your down payment. Your lender can confirm the details for your loan.

What happens if the seller credit is more than my closing costs?

The extra doesn't come back to you as cash. It usually means renegotiating the credit or the price so the numbers fit your loan's rules.

Does a 2-1 buydown help me qualify for a bigger loan?

Usually not. For conventional loans, lenders qualify you at the full note rate, so a temporary buydown lowers your early payments without raising how much you can borrow.

Sources: Fannie Mae Selling Guide B3-4.1-02 (05/07/2025), Fannie Mae Selling Guide B2-1.4-04 (08/07/2024), HUD Handbook 4000.1, Freddie Mac Primary Mortgage Market Survey, CFPB: points and lender credits

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