VA Loan | How to use Seller Concessions & Seller Credits to buy a home

On a VA loan, a seller can pay for all of the veteran's allowable closing costs plus up to 4% of the home's value in additional concessions.

These seller contributions save veterans thousands in out-of-pocket costs, allowing them to buy a home sooner and making it easier to qualify for a loan by paying off existing debt.

In this article, I'll explain how seller contributions work on VA loans.  

Additionally, I'll share real-life examples that demonstrate how to structure a winning offer, allowing you to purchase the perfect home with minimal out-of-pocket expenses.

What are the two types of VA seller contributions?

The two types of VA seller contributions are seller-paid closing costs (often called seller credits) and seller concessions.  

Understanding how each works is key to structuring a winning offer that maximizes your VA loan benefit.

Seller Contributions:

• Seller-Paid Closing Costs (No Limit):  
  This contribution covers your standard transaction fees.  These are the necessary,  itemized costs for finalizing your loan.  The VA sets no dollar limit on these, which helps you purchase a home with significantly less cash out of pocket.
  
  
• Seller Concessions (4% Limit):  
  This contribution covers extra incentives that go beyond standard costs.  The VA caps seller concessions at 4% of the home's final appraised value.  This rule protects you from inflating the home price to cover large giveaways.

How much of the buyer's closing costs can the seller pay on a VA loan?

The seller can pay 100% of your VA-allowable closing costs with no dollar or percentage limit, allowing veterans to purchase a home with less out-of-pocket cash.

Standard costs associated with a purchase include: the lender's loan origination fee, the VA appraisal, the VA funding fee,  the title company's fees, and government taxes.

• Chicago Transfer Tax Calculator
• Loan Estimate Explainer

NewCastle Home Loans offers lower VA loan rates because we invest in you, not in ads.

While big banks and online lenders pour millions into national advertising,  we focus on delivering expert service and five-star results right here in the community. By skipping the expensive ad campaigns, we cut costs and pass the savings directly to you.

Even a slightly lower rate can save you tens of thousands of dollars over the life of your loan. That’s money you keep rather than spending it on someone else’s marketing.

Check your VA loan rate, payment, and costs in Florida, Illinois, Indiana, and Tennessee.

How much can the seller contribute toward seller concessions on a VA loan?

Seller concessions are additional incentives the seller offers, up to 4% of the home's appraised value.  Examples include:

• Paying off your debts (like car loans)
• Covering prepaid property taxes and insurance
• Buying down your interest rate

Am I paying more if the seller covers my closing costs?

Sometimes, yes. But it can be a very smart financial move.

When you ask a seller to pay your closing costs, you are essentially asking to finance those costs into your loan instead of paying for them in cash.

Most sellers focus on their "net proceeds," the final amount of money they pocket. They are often happy to help with your costs as long as their net amount remains the same.

Let's walk through Dennis' options.

What if the VA appraisal is lower than the sale price?

If the VA appraisal comes in lower than the sale price, you can renegotiate the deal or walk away safely with your earnest money back.

Here's a closer look at your four options:

1. Ask the seller to reduce the price.
   Your real estate agent will ask the seller to reduce the price to the appraised value.
   
   
2. Negotiate a compromise.
   You could meet the seller halfway. For instance, the seller might drop the price if you cover the remaining difference in cash.
   
   
3. Cover the difference.
   You may choose to pay the full appraisal gap yourself, though this reduces your available cash.
   
   
4. Walk away.
   If negotiations fail, you can safely back out of the contract and receive a full refund of your earnest money.

• Sales Contract Explainer

Talk to a VA loan expert at NewCastle Home Loans about your seller contributions. If you're buying in Florida, Illinois, Indiana, or Tennessee, we can help you save thousands in out-of-pocket costs.

How do seller contributions help veterans buy homes?

Seller contributions help veterans by saving them thousands in out-of-pocket costs, allowing them to buy a home sooner, and making it easier to qualify for a loan by paying off existing debt.

Here’s a closer look at these three key benefits:

1. Save Money: 
   A seller can pay for all your closing costs. This keeps thousands of dollars in your pocket for furniture, moving expenses, or building a healthy emergency fund for your new home.
   
   
2. Buy Sooner: 
   By covering expenses that you would otherwise pay in cash, seller contributions let you purchase a home now. You can avoid the long delays of saving up for thousands of extra fees.
   
   
3. Qualify Easier:
   If a high monthly payment on a car or credit card is hurting your chances of approval, a seller concession can pay off that debt entirely. This lowers your debt-to-income ratio, which can be the final step needed to secure your loan approval.

How to negotiate seller credits and concessions for a VA loan

Here’s a step-by-step guide to negotiating seller contributions:

1. Estimate closing costs: 
   Work with NewCastle Home Loans to get exact figures before making an offer.
   
   
2. Include terms in the agreement: 
   Strategize with your real estate agent and clearly outline seller contributions in your offer.
   
   
3. Seller response: 
   Negotiate and finalize the sales contract.

Your lender will review the sales contract and confirm the contributions meet VA guidelines before ordering the VA appraisal. 

Why a mortgage pre-approval letter strengthens your offer

A verified pre-approval from NewCastle Home Loans gives you leverage to negotiate seller contributions with confidence.

Before you make an offer, we review your complete financial picture and underwrite your loan upfront. So when you ask the seller to cover closing costs or pay off a debt, your offer comes with a rock-solid approval, not a vague online prequal. Sellers and their agents know you're serious and fully approved to close.

In a competitive market, requests for seller credits or concessions can make sellers uneasy, especially when a national lender or an anonymous online platform backs the buyer.

NewCastle is different.  As a trusted, VA-approved local lender in Florida, Illinois, Indiana, and Tennessee, we go beyond paperwork. Our loan officers personally call the listing agent to vouch for your financing and explain the strength of your offer.  That level of local expertise and advocacy turns your strategic offer into a winning one.