What Are Seller Contributions in Real Estate?

Seller contributions are the maximum amount of money a seller is allowed to contribute toward a buyer’s closing costs under mortgage lender rules. These limits vary by loan type and help ensure the buyer is not over-subsidized in the transaction.

Seller Contributions: Simple Definition

A seller contribution is the lender-regulated cap on how much a seller can pay toward a buyer’s closing costs, prepaid taxes and insurance, or other allowable expenses. These limits are set by loan programs such as FHA, VA, and conventional financing.

Seller contributions are different from seller concessions, which describe the negotiation itself. Contributions refer specifically to the maximum permitted amount.

How Seller Contributions Work

Every mortgage program limits how much a seller can contribute to a buyer’s costs. These limits are based on the buyer’s down payment and are designed to maintain fairness in the loan structure.

Seller contributions can be used toward:

  • Buyer closing costs
  • Prepaid expenses (taxes, insurance, HOA dues)
  • Discount points to lower the buyer’s interest rate
  • Allowable lender fees

They cannot be used for cash back to the buyer or non-allowable expenses.

A seller credit (a type of concession) must always fall within the contribution limits set by the buyer’s loan.

Contribution Limits by Loan Type

Lenders set maximum contribution percentages based on the buyer’s down payment and loan program:

  • FHA Loans: Up to 6% of the purchase price
  • VA Loans: Typically up to 4%
  • Conventional Loans: 3%–9% depending on down payment

If a seller credit or concession exceeds these limits, the lender may require a contract revision or a price adjustment.

Examples of Seller Contributions

  • A seller offers a $6,000 closing cost credit on a $300,000 FHA-financed home (within the 6% limit).
  • A buyer using a VA loan receives a seller contribution covering prepaid taxes and insurance.
  • A seller pays discount points to help lower the buyer’s interest rate on a conventional mortgage.

Each example represents a seller helping with costs—but only up to the maximum contribution allowed by the loan program.

Seller Contributions vs. Seller Credits

The terms are related but not interchangeable:

  • Seller Credit: The actual dollar amount the seller gives the buyer at closing.
  • Seller Contribution: The maximum amount the lender allows the seller to contribute.

A seller credit must always fall within seller contribution limits.

Risks and Limitations

  • Exceeding contribution limits can delay or jeopardize loan approval.
  • Credits that surpass allowable costs cannot be refunded to the buyer.
  • Seller contributions cannot cover repairs required by the lender.
  • Buyers may expect credits in negotiations if contributions are allowed.

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