Buyer's vs seller's typical costs
| Usually paid by the buyer | Usually paid by the seller |
|---|---|
| Loan origination charges and any points | The listing broker's commission |
| Appraisal and credit report fees | Any buyer-agent pay the seller agrees to |
| Lender's title insurance | Mortgage payoff and lien releases |
| Prepaid property taxes, homeowners insurance and interest | Their share of property taxes up to the sale date |
| Escrow deposits for taxes and insurance | Agreed credits or repairs |
| Recording fees | Transfer taxes in many places (custom varies by state) |
The CFPB says buyers generally pay the costs associated with their purchase, but depending on the contract or state law, the seller may pay some of them. Local custom decides many items, such as who buys the owner's title policy or pays transfer tax. For planning, the CFPB has suggested budgeting 2% to 5% of the home price for a buyer's closing costs.
Seller concessions
A seller concession is money the seller agrees to put toward the buyer's costs. Sellers often want a higher price in return, and lenders cap how much a seller or other interested party can contribute.
| Loan type | Maximum seller/interested-party contribution |
|---|---|
| Conventional (Fannie Mae), primary home or second home, LTV/CLTV over 90% | 3% |
| Conventional (Fannie Mae), LTV/CLTV 75.01% to 90% | 6% |
| Conventional (Fannie Mae), LTV/CLTV 75% or less | 9% |
| Conventional (Fannie Mae), investment property | 2% |
| FHA | 6% of the sales price |
| VA | 4% (VA's Buyer's Guide) |
Fannie Mae's limits are based on the lower of the sales price or appraised value. Contributions can pay closing costs and prepaids, but never the down payment or required reserves. Anything over the limit, or over your actual costs, is treated as a price reduction. FHA contributions above 6% are treated as an inducement to purchase. Under FHA, Fannie Mae and Freddie Mac guidance, a seller paying the buyer's agent commission as is customary isn't counted toward these limits.
Worked example
You're buying a $300,000 home with a conventional loan and 10% down, so your LTV is 90%. The cap is 6%, or $18,000. If your closing costs are $9,000, the seller can cover up to $9,000; anything more is treated as a price reduction. On an FHA loan for the same price, the cap is also 6% of the price. With 3.5% down on a conventional loan (LTV over 90%), it drops to 3%, or $9,000.
How to negotiate closing costs
- Ask the seller for a credit in your offer, especially in a slower market or after inspection findings.
- Shop for services you're allowed to shop for, listed on your Loan Estimate, such as title and settlement services in many areas.
- Consider a lender credit: the lender pays some costs in exchange for a higher rate. It isn't free; you pay through the rate.
- Compare Loan Estimates from several lenders.
Estimate your costs with the closing cost calculator. If you're selling, the home sale calculator shows how a concession changes your net.
Sources: CFPB: what are closing costs?; CFPB: how much to spend on a down payment; Fannie Mae B3-4.1-02: interested party contributions; HUD: FHA interested party contributions; FHA INFO 2024-12; NAR: FHFA confirms GSE guidance on IPCs; VA Home Loan Buyer's Guide.
Every worked example on this page was checked with Calcist's own engine and an independent reference.