Published by The Morton Group with AtCoastal Realty | Todd Morton, REALTOR and Owner | November 3, 2026

The practical answer: A Hampton Roads seller may be able to pay some or all of a buyer's eligible closing costs, but the usable amount depends on the loan program, occupancy, loan-to-value ratio, actual costs and appraisal. The contract credit should be confirmed with the buyer's lender before ratification because the headline percentage is only a ceiling.

Illustration of a house key exchange with a calculator and blank closing documents
Original illustration by The Morton Group. Allowable seller-paid costs depend on the loan program and final transaction details.

What are the main seller-credit limits?

Loan type General maximum Important qualification
Conventional primary or second home3%, 6% or 9%Limit changes with loan-to-value ratio
Conventional investment property2%Applies across loan-to-value ranges
FHAUp to 6%Measured against the sales price
VAClosing costs may be negotiated; seller concessions are capped at 4%Normal closing costs and normal discount points are not counted in the 4% concession cap

These are program guidelines, not a promise that every borrower can use the maximum. A lender may apply additional requirements, and a credit cannot exceed the eligible charges available to absorb it.

How do conventional limits change?

For loans following Fannie Mae's interested-party contribution rules, a principal residence or second home generally allows:

  • 3% when the loan-to-value or combined loan-to-value ratio is above 90%
  • 6% when the ratio is 75.01% through 90%
  • 9% when the ratio is 75% or less
  • 2% for an investment property, regardless of the ratio

Fannie Mae calculates the limit using the lower of the sales price or appraised value, not the loan amount. The credit also cannot exceed the buyer's actual closing costs. Freddie Mac's current guide uses the same 3%, 6%, 9% and 2% framework, although the lender must apply the rules for the specific loan being delivered.

What does FHA allow?

The FHA Single Family Housing Policy Handbook says interested parties may contribute up to 6% of the sales price toward eligible origination fees, other closing costs, prepaid items and discount points. The limit also includes permanent and temporary interest-rate buydowns and certain other payment supplements.

An FHA contribution cannot be used to satisfy the buyer's minimum required investment. Any amount above actual eligible costs or above the program limit can be treated as an inducement to purchase, so the lender should review the contract wording and numbers before the offer is finalized.

Why is the VA rule often misunderstood?

The Department of Veterans Affairs explains that sellers and buyers may negotiate payment of closing costs. VA does not place the same 4% limit on ordinary loan closing-cost credits. Instead, the 4% cap applies to defined seller concessions, measured against the home's reasonable value.

VA examples of concessions include paying the funding fee, paying off a buyer's debt or prepaying hazard insurance. VA Pamphlet 26-7 says normal discount points and payment of the buyer's closing costs are excluded when testing the 4% concession limit. This distinction is why a simple "VA sellers can only pay 4%" statement is incomplete.

What can make a credit unusable?

  • The buyer has fewer eligible closing costs than expected.
  • The appraisal is lower than the contract price.
  • The credit exceeds the loan program's limit.
  • The contract describes a use the lender will not approve.
  • A last-minute rate or fee change reduces the costs available to absorb the credit.

Unused seller credit generally does not become cash back to the buyer. Ask the lender for a current fee worksheet or Loan Estimate and leave enough coordination time before closing.

The Hampton Roads takeaway

Seller-paid closing costs can preserve a buyer's cash and help a seller solve a real affordability problem, but only when the credit fits the loan. Compare the credit with the buyer's actual costs, financing and appraisal rather than negotiating from a percentage alone.

For the strategy side, read our price cut versus seller credit guide. For current local context, see the Hampton Roads real estate market report. To discuss a property-specific offer, contact The Morton Group.

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