How to Ask a Home Seller to Pay a Closing Cost Credit

Image shows a person standing in front of a suburban home, holding up papers that read "Closing costs," illustrating a headline that reads: "What to Know About Closing Cost Credits," along with text that reads, "Buyers who are for a closing cost credit are often first-time homebuyers; the primary way may buyers get sellers to pay a closing cost credit is by agreeing to a higher purchase price; another approach entails the buyer accepting the home in its as-is condition and not demanding major repairs"

The Balance / Daniel Fishel

As counterintuitive as it might sound, home sellers sometimes pay part or even all of their buyers' closing costs. Who pays closing costs depends on several factors, including state law, what's customary in your area, and whether you're in a buyer's market or a seller's market. Let's look at the circumstances under which a seller pays closing costs and how to get a seller to agree to do so.

Key Takeaways

  • A closing cost credit is a negotiated cost between buyer and seller that reduces the expense to the buyer.
  • Closing costs depend on many factors and can sometimes be more than anticipated.
  • You can negotiate a closing cost credit so that it benefits both the buyer and seller.

What Kind of Homebuyers Seek a Closing Cost Credit?

Many buyers who ask for a closing cost credit are first-time homebuyers. They might be obtaining a Federal Housing Authority (FHA) loan or Department of Veterans Affairs (VA) loan, programs whose generous terms enable people with little in the way of upfront reserves to become homeowners. The FHA requires buyers to make a down payment of only 3.5% of the home's purchase price, and the VA requires no down payment at all.

Many of these buyers don't have the ready cash to pay the closing costs, which typically range from 3% to 6% of the home's purchase price. Even experienced homebuyers may also lack the liquidity to pay closing costs that can run into the tens of thousands of dollars, especially after they've made a 20% down payment on a conventional mortgage. So, those buyers might also ask the seller for closing cost assistance.


Lenders might offer no-closing-cost mortgages, but that usually means that the loan has a higher interest rate or that the closing costs are added to your loan.

How Much Can Closing Cost Credits Be?

Although sellers need to be amenable to the idea, the matter of whether to pay the closing costs isn't totally up to them. The buyer's mortgage lender usually sets restrictions as to how large the credit can be. Some lenders limit it to 3% of the purchase price, for example. Seller closing cost credits, also known as seller concessions, also can't exceed the actual amount of the closing costs.

Say the purchase price of a home is $300,000, and the maximum credit the lender allows is 3%, or $9,000. If the closing costs end up totaling 2%, or $8,000, that is all that the lender would officially allow. Seller concessions are also limited depending on the type of mortgage. VA mortgages, for example, only allow up to 4% of the purchase price, and the seller credits can only be used for certain costs.

Negotiating a Credit: A Bigger Purchase Price

The primary way that many buyers get the sellers to pay a closing cost credit is by agreeing to a higher purchase price. For example, let's say a home is listed at $300,000 and the buyers are figuring on 3% in closing costs ($9,000). So, a buyer would offer that amount (maybe rounding it up to $310,000), contingent on receiving a $9,000 credit. Even with paying that credit, the seller still nets $300,000.

The drawback to this approach comes if the buyer's lender doesn't appraise the home at $310,000. If there is no provision for this in the purchase contract, the seller could be stuck paying a credit based on the higher sales price and netting less than anticipated.

Negotiating a Credit: A Fast Close

Another popular approach to getting the seller to pay closing costs relates to escrow, which is the period between the signing of the contract and the actual completion of the deal. Sellers want qualified buyers who won't cause any problems during the escrow period, like making a fuss about issues uncovered by the home inspection. If a buyer offers to accept the home in its as-is condition and not demand major repairs, it could encourage the seller to agree to some concessions, which is a small price in return for the assurance that escrow will close without hassles.

Negotiating a Credit: Other Trade-Offs

If the seller seems reluctant to offer a credit, a buyer could ask for a different sort of break, such as a lower down payment or less earnest money. Either of these options leaves the buyer with more funds for closing costs. Alternatively, the buyer could ask for a little discount on the home's price (sellers usually work a little flexibility into the price tag anyway), which will also lower the closing costs. Finally, if the seller does not want to pay the full amount of the closing costs, ask whether they'll pay a smaller percentage of them.

Frequently Asked Questions (FAQs)

What fees are included in closing costs?

Buyer's closing costs can include appraisal fees, title policies, escrow fees, notary fees, attorney fees, recording fees, taxes, home warranties, home inspections, and lender fees. Lender fees are often the most expensive part of closing costs.

When can a buyer receive cash back at closing?

In most cases, buyers can only receive cash back at closing in the form of a refund for fees already paid. For example, if the buyer puts down a large earnest money deposit and the seller agrees to pay part of the closing costs, the buyer might then receive a refund.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Consumer Financial Protection Bureau. "What Fees or Charges Are Paid When Closing on a Mortgage and Who Pays Them?"

  2. Department of Housing and Urban Development. "Let FHA Loans Help You."

  3. Department of Veterans Affairs. "Ten Things Most Veterans Don't Know About V.A. Loans."

  4. Consumer Action. "You Can Buy a Home," Page 1.

  5. Consumer Financial Protection Bureau. "Is There Such a Thing as a No-Cost or No-Closing Loan or Refinancing?

  6. U.S. News and World Report. "How Do Seller Concessions Work?"

  7. Nolo. "Escrow and Your Role as Home Seller."

  8. Fannie Mae. "Selling Guide."

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