Can my buyer use seller credits to cover closing costs?
Rob Miller explains how seller concessions work in Wisconsin, the limits by loan type, and how to structure them without blowing up a deal.
Rob Miller, Branch Manager at MadCity Home Loans, explains seller concessions to Realtors so they can structure deals that actually stick.
Can my buyer use seller credits to cover closing costs?
Yes — and this is one of the most powerful tools available for buyers who are cash-light but income-strong. Here are the limits by loan type that every Wisconsin Realtor needs to know:
- FHA Loans: Sellers can contribute up to 6% of the purchase price toward the buyer's closing costs.
- Conventional Loans (less than 10% down): Seller concessions are capped at 3% of the purchase price.
- Conventional Loans (10–25% down): Cap rises to 6%.
- Conventional Loans (25%+ down): Cap is 9%.
- VA Loans: Sellers can pay all of the buyer's loan-related closing costs, plus up to 4% in additional concessions (paying off debts, buying down the rate, etc.).
- USDA Loans: Seller concessions capped at 6%.
What Seller Credits Can and Can't Pay For
Seller credits can cover lender fees, title insurance, prepaid taxes and insurance, and discount points — but they cannot cover the buyer's down payment. They reduce out-of-pocket cash at closing, not the required equity contribution.
Strategic Tip for Listing Agents
When negotiating, consider framing seller credits as part of a higher offer price. A buyer who offers $355,000 with $5,000 in credits is often better for a seller than a $350,000 clean offer, depending on the seller's net position and the appraisal situation.
Related Guide: Help your buyers understand closing cost totals in Wisconsin with our Closing Costs Guide.