Feeling squeezed by closing costs in Durham? Seller concessions can help you lower your cash to close without changing your down payment requirement. If you are buying or selling, understanding how these credits work will help you plan your numbers, write stronger offers, and avoid last-minute surprises. In this guide, you will learn what seller concessions are, program caps by loan type, when they make sense in Durham, and how to structure them step by step. Let’s dive in.
What seller concessions are
Seller concessions are funds the seller agrees to pay on your behalf at closing. They show up as a credit on your Closing Disclosure and reduce your out-of-pocket cash to close. They do not count as down payment and they must follow your lender’s rules.
You can typically use seller credits for closing costs, prepaid items, and discount points that buy down your interest rate. Common examples include lender origination fees, appraisal and title fees, recording fees, homeowner’s insurance premiums, property tax escrows, initial mortgage insurance, and prepaid interest. Some programs also allow reasonable owner or title fees.
There are also limits. You cannot use a seller concession for your required down payment. You also cannot receive cash back beyond allowable credits. If you raise the purchase price to offset a credit, the property still has to appraise at the contract price. If it does not, you may need to bring additional funds or renegotiate.
Program limits at a glance
Loan programs cap how much a seller can contribute. Always confirm the current rules with your lender because individual lenders may add stricter overlays.
Conventional loans
- If your down payment is under 10 percent, the seller concession cap is typically 3 percent of the purchase price.
- If your down payment is 10 to 25 percent, the cap is typically 6 percent.
- If your down payment is over 25 percent, the cap is typically 9 percent.
- Credits can cover closing costs, prepaids, and discount points. They cannot cover down payment.
FHA loans
- The standard maximum seller contribution is 6 percent of the lesser of the sales price or appraised value.
- Allowed uses include closing costs, prepaids, and certain discount points. Not allowed for down payment.
VA loans
- VA permits seller-paid items and certain concessions. A commonly referenced cap for some allowable items is up to 4 percent of the loan amount. Rules vary by structure, so confirm with your lender.
- The seller may be able to pay the funding fee, reasonable discount points, and prepaids within program guidelines.
USDA loans
- USDA loans commonly allow up to 6 percent of the sales price for concessions that cover closing costs and prepaids.
- Credits cannot be used for down payment, although many USDA loans do not require a borrower down payment.
Lender overlays to watch
- Some lenders or investors apply stricter caps or limit seller-paid discount points for higher-risk files.
- Investment properties and certain non-QM or portfolio loans often have tighter rules or do not allow concessions.
When concessions make sense in Durham
Seller concessions can be a smart tool when you want to reduce your cash to close while still meeting down payment requirements. They are especially useful if you prefer to preserve emergency savings, combine a gift for down payment with credits for closing costs, or buy down your interest rate.
Market conditions matter. In a strong seller’s market with low inventory and multiple offers, sellers may be less willing to offer credits. In a balanced or buyer-friendly period with rising days on market or softening prices, concessions can help bridge financing gaps and get a deal done.
Be mindful of appraisal risk. If you increase the contract price to fund a seller credit, the home must appraise at that new price. Durham neighborhoods with rapidly changing prices can make this more sensitive. Your agent and lender can help evaluate comps and structure contingencies.
Real numbers: simple Durham examples
These hypothetical scenarios show how concessions can affect cash to close. Your numbers will vary by home, lender fees, taxes, and insurance.
Example A: FHA first-time buyer
- Price: $350,000
- FHA maximum concession: 6 percent = $21,000
- Estimated closing costs and prepaids: about 3 percent = $10,500
- Outcome: A $10,500 seller credit could cover estimated closing costs. You still need the FHA minimum down payment of 3.5 percent ($12,250) unless a permitted gift covers it.
Example B: Conventional with 5 percent down
- Price: $450,000
- Down payment: 5 percent = $22,500
- Conventional concession cap for under 10 percent down: 3 percent = $13,500
- Estimated closing costs: about 2.5 percent = $11,250
- Outcome: An $11,250 seller credit could cover closing costs. You still bring the $22,500 down payment. If you want the seller to help with discount points, you can request up to the $13,500 cap total.
Example C: VA buyer
- Loan amount: $400,000
- Commonly referenced cap for certain VA-allowable items: about 4 percent of the loan amount = $16,000
- Estimated closing costs: about $8,000
- Outcome: The seller could pay closing costs and possibly the funding fee or discount points within VA rules. You still must meet VA residual income and underwriting standards.
How to structure your offer in Durham
Use this simple process to keep your deal on track from offer to closing.
Before you write the offer
- Ask your lender for a Loan Estimate that shows closing costs and how a seller credit would apply.
- Confirm the program-specific concession cap and any lender overlays.
- Decide whether to apply the credit to closing costs, prepaids, a rate buy-down, or a mix.
In the contract
- Spell out the contribution clearly. For example: “Seller will contribute $X toward buyer’s closing costs and prepaids.”
- If you plan to increase price to fund the credit, discuss appraisal risk and include appropriate contingencies.
During underwriting and appraisal
- Provide the fully executed contract and any addenda to your lender so the credit is documented.
- Remember that the appraiser must support the contract price. Concessions do not change market value.
At closing in Durham County
- Your Closing Disclosure will show the seller credit and your final cash to close. Compare it to your Loan Estimate.
- Seller proceeds will reflect the credit along with prorations and other adjustments.
- Local offices such as the Durham County Register of Deeds and the Durham County Tax Office influence recording and tax proration timing. Your closing attorney or title company will coordinate these details.
Tips for Spanish-English households
Clear communication is everything. Ask your lender and agent to explain the Loan Estimate and Closing Disclosure in Spanish if that helps your family make confident decisions. Bilingual professionals and translated materials can prevent misunderstandings.
Focus on the idea of cash to close, or efectivo para cerrar. Seller concessions reduce that number, but they do not replace your down payment unless a permitted third-party gift covers it. Make sure all credits and any price changes are accurately written in the contract and match your lender’s disclosures.
Local housing counselors and state programs can provide education and Spanish-language resources. Your agent can connect you to options that fit your situation.
Common pitfalls to avoid
- Counting a seller credit as down payment. Lenders still require you to document your required down payment.
- Exceeding program caps. Ask your lender for the exact percentage limit for your loan type and down payment tier.
- Ignoring lender overlays. Some lenders restrict seller-paid discount points or cap credits below program maximums.
- Overpricing to cover credits without appraisal support. If the home does not appraise at the contract price, you may need to bring extra funds or renegotiate.
- Waiting to document the credit. Make sure the contribution is written in the contract and reflected on your Loan Estimate and Closing Disclosure.
Bottom line and next steps
Seller concessions can make your Durham purchase more affordable by reducing cash to close, as long as you respect program caps and plan for appraisal and lender review. With the right structure, they can help you preserve savings, buy down your rate, or bridge a tight budget.
If you want a clear plan tailored to your loan type and neighborhood, our bilingual team is here to help you run the numbers, write a competitive offer, and get to the closing table with confidence. Connect with The Cedeno Group Real Estate. Find Your Dream Home — Habla con Nosotros.
FAQs
What are seller concessions in North Carolina real estate?
- Seller concessions are credits a seller pays at closing to cover allowable buyer costs like closing fees, prepaids, and discount points, which lowers the buyer’s cash to close but does not count as down payment.
How much can a seller pay toward my closing costs with an FHA loan in Durham?
- FHA generally allows up to 6 percent of the lesser of the sales price or appraised value to cover allowable costs such as closing fees, prepaids, and certain discount points.
Can seller concessions cover my down payment in Durham?
- No. Program rules require you to bring your down payment from your own funds or a permitted gift; seller credits cannot be used for down payment.
Do seller concessions affect the appraisal on a Durham home?
- The appraiser still determines market value. If you raise price to fund a credit, the home must appraise at that higher contract price or you may need to bring additional funds.
Are seller concessions common in competitive Durham markets?
- In strong seller’s markets, credits are less common because sellers have multiple offers; they are more likely in balanced or buyer-friendly conditions.
How do VA loan seller concessions work for veterans buying in Durham?
- VA allows sellers to pay certain costs and concessions, with a commonly referenced cap of up to about 4 percent of the loan amount for some items; confirm specifics with your lender.
