How do you calculate seller concessions?
Concession = the agreed credit, capped by loan type: 3% of price (conventional with <10% down), 6% (conventional 10–25% down, and FHA), 9% (conventional 25%+ down), 4% (VA). On a $350,000 FHA purchase, the cap is $21,000 — far more than typical closing costs.
Concession caps by loan type (share of price)
| Loan type | Cap | Cap on $350,000 |
|---|---|---|
| Conventional, <10% down | 3% | $10,500 |
| Conventional, 10–24.9% down | 6% | $21,000 |
| Conventional, ≥25% down | 9% | $31,500 |
| FHA | 6% | $21,000 |
| VA (concessions; costs extra) | 4% | $14,000 |
How to read this table
- Conventional, ≥25% down sits at the top of the table (9%) — $31,500. If your situation looks like this row, plan against the upper half of the range rather than the midpoint.
- Conventional, <10% down anchors the bottom (3%) — $10,500. Treat this as the conservative case you should still be profitable at.
- The gap between the top and bottom row is roughly 3.0×. That spread is why a single blended average is close to useless here — pick the row that matches your setup instead of averaging the column.
- With 5 reference points in the "concession caps by loan type (share of price)" table, the fastest way to use this page is to find the closest row, take its cap, then stress-test it ±30% before you build a plan on it.
Context
Concessions can only cover actual closing costs and prepaids — you can't pocket the difference, so don't negotiate a credit larger than your real costs. Two cautions: the home must still appraise at the full contract price (a $355,000 price with a $5,000 credit must appraise at $355,000), and in hot markets a concession request weakens your offer versus a clean one. A rate buydown is a legitimate use: a 2-1 buydown on a $350,000 loan costs about $8,000 and cuts the payment ~$450/month in year one.
What moves this number
Financing terms
Rate, down payment and amortisation drive cash-on-cash return more than purchase price does. The same building can cash-flow or bleed depending on the loan.
True operating expense ratio
Management, insurance, tax, maintenance, vacancy and capital reserve typically consume 35–50% of gross rent. Models that skip reserves overstate returns badly.
Vacancy and turnover
One 45-day vacancy plus a turn can erase a year of thin cash flow. Underwrite 5–8% vacancy even in tight markets.
Local regulation
Rent rules, short-term rental caps and licensing requirements change the achievable revenue of an identical property between neighbouring cities.
Methodology
Caps per Fannie Mae selling guide, HUD, and VA handbook (2025–2026). Buydown cost example at ~6.75% note rate.
Assumptions and caveats
- Returns exclude appreciation and principal paydown unless a row states otherwise.
- Local tax, insurance and regulation can move these figures by several points in either direction.
- This page was last reviewed on 2026-10-01. Ranges are updated as new data lands, so re-check before using them in a contract or a plan.
- Use these numbers as a starting range, not a guarantee — your own historical data always beats a benchmark.
Frequently asked questions
How do you calculate seller concessions?
Concession = the agreed credit, capped by loan type: 3% of price (conventional with <10% down), 6% (conventional 10–25% down, and FHA), 9% (conventional 25%+ down), 4% (VA). On a $350,000 FHA purchase, the cap is $21,000 — far more than typical closing costs.
Which option pays the most in the concession caps by loan type (share of price) table?
Conventional, ≥25% down, at 9% ($31,500). That row represents the strongest case in this dataset, so use it as an upper bound rather than an expectation.
What is a realistic low-end figure?
Conventional, <10% down at 3% ($10,500). Plan your costs so the low end still works, then treat anything above it as upside.
Why do the numbers vary so much?
The spread between the highest and lowest row is about 3.0×. Financing terms and true operating expense ratio explain most of that gap — see the drivers section above for the full list.
Where do these numbers come from?
Caps per Fannie Mae selling guide, HUD, and VA handbook (2025–2026). Buydown cost example at ~6.75% note rate.
How can I estimate my own number instead of using a benchmark?
Use the Closing Costs Calculator on RevenueLab — it takes your own inputs and returns a figure specific to your setup, which is always more accurate than a published range.
Model your own numbers
Related reading
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Last updated 2026-10-01.