USDA Loans and Seller Concessions
USDA loans are a generous government-backed mortgage option available to homebuyers in eligible locations. Despite only being available for rural and certain suburban properties, USDA guidelines permit purchases in approximately 97% of the United States. And one of the biggest benefits is that no down payment is required.
But even though you won’t have to make a down payment at closing, it doesn’t mean you won’t pay anything. That’s because all home buyers have to pay closing costs, including appraisal fees, title insurance, credit reports, and lender fees. Some are related to processing and finalizing a mortgage loan, while others are costs associated with owning a home, like property taxes and homeowners insurance.
Fortunately, the seller may cover some of your closing costs in the form of seller concessions. What are selling concessions, and how much can they reduce closing costs? What are the pros and cons of USDA seller concessions and their limits across different loan products? Keep reading for answers to these questions and helpful information that can save you money.
Closing costs for USDA loans typically cost between 3% to 6% of the home purchase price. Common closing costs include the following:
Separately, USDA homebuyers will also pay a 1% upfront guarantee fee unique to this loan program. Buyers can usually finance the upfront fee into their loan on top of what they’re borrowing to purchase the home.
As for the other closing costs listed above, these typically cannot be rolled into the loan or financed. But rather than use your own funds, you may be able to get the home seller to cover some or all of these costs at closing.
A seller concession, also called a seller credit, involves the seller agreeing to provide a portion of the profits from the sale of their home to pay for some or all of the closing costs for the buyer.
“Seller concessions get applied right at closing, although you won’t get cash in hand,” explains personal finance expert Andrew Lokenauth. “The credits show up on the final closing disclosure, reducing your total cash needed at closing. It’s basically the seller saying, ‘I’ll take less money so that you can pay less out-of-pocket.’”
Usually, the buyer and seller agree on seller concessions during the purchase contract negotiations. You and the seller agree on the concession amount and write it into your contract. At closing, the seller concessions come from the home sale proceeds and pay for costs like lender fees or escrow reserves.
“With a USDA loan, seller concessions can be a big help because many buyers use these loans due to limited savings, and the seller might cover costs like the appraisal, title fees, or even prepaid taxes,” notes Baruch Mann, a financial expert and CEO of The Smart Investor.
Seller concessions are increasingly popular nowadays. For proof, consider that nearly 45% of U.S. home sales in the first quarter of 2025 included seller concessions, according to a new report from Redfin. That’s an increase from 39.3% during the same period last year and just below the record high of 45.1% in early 2023.
USDA loans allow seller concessions up to 6% of the home’s sales price. Seller concessions can cover just about any eligible closing cost, although they can’t be used for your down payment if you plan to make one.
“This can make a big difference for buyers who don’t have a lot of cash saved for upfront expenses,” Mann continues. “For example, let’s say you’re buying a home for $300,000. Six percent of that is $18,000. If your closing costs total $10,000, and the seller agrees to cover them up to the allowed limit, you wouldn’t pay anything out-of-pocket for those costs. The extra $8,000 couldn’t be used, however, unless it’s for any eligible items like prepaid taxes or insurance.”
Additionally, seller concession dollars can’t go toward luxury upgrades, furniture, or anything outside the lender’s approved fee list. Also, you can’t get any leftover seller concession funds refunded to you as cash.
“The goal with seller concessions is to help with actual transaction-related costs, not extras, so that the buyer can close with little to no money out of pocket if everything lines up,” says Mann.
Seller concessions are available on many different types of mortgage loans. Let’s compare how generous the ceiling is on USDA loans versus other forms of home financing:
| Loan Type | Seller Concession Limit | Notes |
|---|---|---|
| USDA | Up to 6% of the purchase price | Can be applied toward closing costs and prepaid expenses |
| VA Loan | Up to 6% of the purchase price | Covers closing costs, prepaid items, and discount points |
| FHA Loan | Up to 4% of the home’s appraised value (for specific concessions) and unlimited closing costs | 4% cap applies to VA funding fee, prepaid taxes, insurance, and non-loan perks; closing costs aren’t capped |
| Conventional loans (Fannie Mae and Freddie Mac) for primary residences and second homes | Varies by loan-to-value (LTV) ratio and occupancy type: LTV > 90%: 3% LTV 75.01-90%: 6% LTV ≤ 75%: 9% | Based on the lesser of the sales price or appraised value |
There are upsides and downsides to using seller concessions with a USDA loan. Let’s explore each.
Benefits
On the plus side, seller concessions can:
Drawbacks
Then again, seller concessions can:
Getting help with closing costs could also mean you’re borrowing more than you might otherwise would. For example, if you’re looking at a $200,000 home and your closing costs are $5,000, you might offer the seller $205,000, with them paying all of your closing costs. That additional money means you end up paying more in interest over the life of the loan than if you had just paid the costs in the first place.
You’re in a better position to ask for seller concessions if:
“In the current market, it can be harder to get a seller credit. Typically, I find they are more commonly added after having the home professionally inspected, a time when defects and issues arise for the buyer,” says Jeffrey Koerner, a loan officer with Movement Mortgage. “If a buyer finds some things in the home that can be fixed but may be large expenses, they are in a better position to request seller concessions, which enable them to have more funds of their own to make the repairs later.”
Requesting seller concessions can help reduce your out-of-pocket closing expenses. But they aren’t the only way to achieve this strategy.
“You can also save money by shopping around for different title companies, title insurance, home inspectors, real estate attorneys, and lenders, and also carefully comparing lender fees, which may save you hundreds of dollars,” recommends Lokeanuth.
Additionally, try to close on the home at the end of the month, which reduces prepaid interest. Check around for local homebuyer assistance programs, which may offer grants or small loans that can help cover your closing costs.
And lender credits help cover part of your closing costs in exchange for a slightly higher interest rate. This tradeoff could make sense if you plan to refinance or sell within a few years. Otherwise, the long-term cost of the higher rate may outweigh any short-term savings. .
Mann points out that the housing market in 2025 is experiencing shifts that can benefit buyers, including borrowers with USDA loans. This can increase opportunities to negotiate favorable terms, such as seller concessions.
“Staying informed about local market conditions and being prepared to negotiate can result in significant savings and a smoother home buying experience,” he adds.
