Understanding all aspects of the USDA homebuying process can be daunting, especially when making significant financial decisions. One aspect that often confuses buyers is seller concessions, a valuable tool for reducing upfront costs.
What are Seller Concessions?
Seller concessions are agreements where the seller agrees to pay some or all of the buyer's closing costs.
Closing costs generally range from 3% to 6% of the home’s purchase price and include:
Loan-related costs: origination, processing, and underwriting fees
Property-related costs: home insurance premiums, prepaid property taxes, and title costs
By negotiating seller concessions, USDA homebuyers can reduce these expenses and make homeownership more affordable.
USDA Max Seller Concessions For 2026
The USDA allows sellers to contribute up to 6% of the home’s purchase price or appraised value toward the buyer’s closing costs.
Depending on your unique situation, seller concessions may cover most or all of your USDA loan-related closing costs.
Pros and Cons of USDA Loan Seller Concessions
Using seller concessions for your USDA home loan offer has several pros and cons you should consider:
| Pros | Cons |
|---|---|
| Reduces or eliminates upfront closing costs | Can be less appealing to sellers, especially in hot markets |
| Makes buying a home more financially accessible | Potential increase in total loan amount |
| Use extra funds for other needs | Concessions are capped at 6%, which may not cover all closing costs |
Benefits of Seller Concessions for USDA Loans
1. Makes Homebuying More Affordable
One of the biggest advantages of seller concessions is how much they can reduce your upfront expenses. Lower upfront costs make homebuying more accessible, especially for borrowers who may be working with tight budgets. By reducing out-of-pocket expenses, seller concessions can lower the financial barrier to homeownership and help buyers qualify more comfortably.
2. Lets You Preserve Cash for Moving, Repairs, or Savings
When you’re not spending thousands on closing costs, you can redirect that money to priorities like moving expenses, home repairs, emergency savings, or paying down other debts. This added flexibility can make the transition into homeownership much smoother.
3. Works Well in Buyer-Friendly Markets
Seller concessions are most effective in markets where buyers have leverage. In situations where sellers need to attract offers or move a property quickly, adding concessions is often an easier negotiation point, giving buyers more room to secure favorable terms.
Drawbacks of Seller Concessions for USDA Loans
1. Less Appealing to Sellers
While seller concessions benefit buyers, they may be less appealing to sellers. Sellers may view concessions as a reduction in their profit, especially in competitive markets, which can make your offer less attractive than others. When multiple buyers are competing, this request may push your offer down the list.
2. Potential Increase in Loan Amount
Some buyers may opt to make a slightly higher offer to offset seller concessions. This option can make the upfront costs more manageable while maintaining an attractive offer, but increasing your total loan amount means accumulating more interest over the life of your loan, potentially resulting in greater overall expenses.
For example, if a $250,000 home has $7,500 in closing costs, increasing your offer to $257,500 may lower your upfront costs, but it simultaneously raises your loan amount and total interest over the lifetime of the loan.
3. Concessions Are Capped at 6%, Which May Not Cover All Closing Costs
USDA guidelines limit seller concessions to 6% of the purchase price. While this can cover a significant portion of closing costs, it may not cover everything, especially if the buyer’s costs are higher due to prepaid expenses or optional items, such as buying down the interest rate.
USDA Loan Max Seller Concessions vs. Other Loans
When compared to other types of loans, USDA loans offer an attractive maximum seller concessions limit.
To put this into perspective, check out the chart below to compare maximum seller concessions for conventional, USDA, FHA and VA loans:
| Loan Type | Maximum Seller Concessions |
|---|---|
| Conventional | 9%* |
| USDA | 6% |
| FHA | 6% |
| VA | 4% |
How to Negotiate Seller Concessions
Negotiating seller concessions can be a strategic process that requires careful planning and efficient communication between the buyer and seller.
Follow these tips to negotiate seller concessions successfully:
Know your budget: Establish a solid foundation by determining how much you can comfortably afford before negotiating.
Get pre-approved for your USDA loan: A USDA loan preapproval shows sellers that you are a serious, qualified, and financially ready buyer.
Understand the seller’s perspective: Tailor your offer to the seller’s priorities, such as selling quickly or maximizing profit.
Consider the current housing market: In a buyer’s market, sellers are more open to concessions. In a seller’s market, they’re less receptive.
Work with an experienced real estate agent: A knowledgeable real estate agent can help you negotiate effectively and keep your offer competitive.
With over 11 years in the mortgage industry, Matt Roy has spent the last 7 years as an underwriter. He’s passionate about understanding the “why” behind lending decisions and helping homebuyers succeed.
