07/11/2026
Concession guidelines for sellers
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Article By: Jim Porter – June 12, 2026
In Solano and Yolo County, first-time homebuyers and middle class move-up buyers are often buying homes with barely enough money to close.
First-time homebuyers around here rarely have more than 5% down and most first-time buyers have less than 3.5% of the sales price, which is the down payment required to qualify for an FHA loan, the easiest loan to qualify for when it comes to FICO scores and debt ratios.
Cash to close is always the biggest challenge for renters that are living paycheck-to-paycheck that lack savings or parents with money to gift. Veterans can buy with zero down and CALHFA qualified buyers can get a down payment assistance loan for the down payment, which leaves these buyers with nothing more than the recurring and non-recurring closing costs to come up with at the end of the 21- to 45-day residential purchase agreement (RPA).
The recurring costs are the things that you have to pay once and then again for the rest of your life, like property taxes, homeowner insurance and mortgage interest.
When you buy a house with 5% down or less, the lender requires you to have an impound account for property tax and insurance to be paid monthly and included with your mortgage payment. If you buy a home that closes on July 15, your first payment will be due Sept. 1. To make the 360-month amortization accurate, the lender will collect 16 days of prepaid interest on July 15 so when Sept. 1 rolls around there will be an even 30 days of interest due.
Recurring closing costs for prepaid interest, the first-year home insurance premium and setting up the property tax impound account can add up to $10,000 for a $650,000 house depending on the cost of the fire insurance and the property tax rate.
The non-recurring closing costs are the fees that happen once and never again like loan originations fees, discount buy-down points, appraisal, termite, roof and whole house inspections, title insurance and escrow fees, recording fees and, in some cases, transfer taxes and home warranty fees. Non-recurring closing costs on a $650,000 house can vary and range from as little as $7,500 to as much as $25,000 depending on the loan costs.
A few weeks ago, I wrote about new home builders and “concessions galore.” A Realtor asked me the other day if he should have his buyer ask for a $10,000 seller credit for closing costs or $10,000 less on the price for a home that has been on the market for 30 days. In this case, his buyer was putting down 40% of the sales price so it did not make sense to pay the higher price for a closing cost credit. The lower price meant lower property taxes and closing costs and, unlike the new home builders, it made no sense to artificially inflate the price for future sellers to use this home as a comparable sale. Now if his buyer was squeaking in with barely enough funds to close escrow, then the seller’s credit of $10,000 can make the dream a reality for his buyer.
The guidelines for seller credits are as follows: On VA loans the maximum seller contribution for buyer closing costs is 4% of the sales price, on FHA it is a generous 6% and on Freddie and Fannie conventional financing for buyers with less than 10% down it is 3% of the sales price and the seller can never credit the buyer more than the total non-recurring and recurring closing costs.
A seller’s credit for closing costs can help a buyer become a homeowner with only $1 out of her pocket. Realtors in our market have been doing this for 50 years. One dollar moves you in!
Jim Porter, NMLS No. 276412, is the branch manager and senior loan adviser of Solano Mortgage, NMLS No. 1515497, a division of American Pacific Mortgage Corporation, NMLS No. 1850, licensed in California by the Department of Financial Protection and Innovation under the CRMLA / Equal Housing Opportunity. Jim can be reached at 707-449-4777.
Jim Porter, NMLS No. 276412, is the branch manager of Solano Mortgage, NMLS No. 1515497, a division of American Pacific Mortgage Corporation, NMLS No. 1850, licensed in California by the Department of Financial Protection and Innovation under the CRMLA / Equal Housing Opportunity. Jim can be reached at 707-449-4777.
