“Seller concessions” is one of the most misunderstood terms in VA buying. Buyers hear that the VA caps them at 4% and assume that means the seller can only help with 4% of costs. That is not quite right. The VA separates seller help into two buckets, and only one of them is capped.
This is the rules deep-dive: what the VA counts as a concession, what it does not, and how the 4% is calculated. If you mainly want to know how to ask a seller to cover your closing costs, the companion piece can a seller pay closing costs on a VA loan? is the more practical starting point.
The two buckets of seller help
On a VA purchase, anything the seller pays on the buyer’s behalf falls into one of two categories:
- The buyer’s normal closing costs and market-appropriate discount points. These are the standard costs of getting the loan and closing the purchase. The seller can pay them, and they are not counted as concessions.
- Seller concessions. Anything of value the seller contributes beyond those normal costs. Concessions are capped at 4% of the home’s VA appraised value.
That structure is why VA buyers can sometimes receive more total seller help than buyers using other loan types, even though the concession cap itself is 4%.
What counts toward the 4% limit
Common examples of items the VA treats as concessions include:
- The VA funding fee, if the seller pays it instead of the buyer financing it
- Prepaid expenses, such as property taxes, homeowners insurance and the initial escrow deposit
- Paying off the buyer’s debts, such as a credit card or collection, to help the buyer qualify
- Gifts or credits of value from the seller beyond normal costs, such as items that would otherwise be a separate purchase
- Discount points above what is market-appropriate for the loan
What does not count toward the 4% limit
These generally sit outside the cap when the seller pays them:
- Lender fees allowed on a VA loan (the VA limits what veterans can be charged)
- VA appraisal fee and credit report fee
- Title insurance, escrow and recording fees
- Market-appropriate discount points to buy down the rate
Inspection costs, including the wood-destroying insect inspection required on VA purchases in Washoe, Lyon, Churchill and several other Northern Nevada counties, are usually handled as separate contract terms. How any particular fee is classified can vary with how it appears on the loan estimate, so your lender will make the final call.
The classification is done by your lender and underwriter, not by the purchase contract. Before you settle on a seller credit, have your lender review the numbers so nothing needs to be renegotiated late in escrow.
How the 4% is calculated
The VA measures the cap against the home’s reasonable value, meaning the value set by the VA appraisal, not the loan amount. On a typical $0-down purchase the appraised value and the price are close, so the cap lands in about the same place either way. If the appraisal comes in above or below the price, the exact figure changes, and your lender will confirm it for your file.
A few more rules of thumb:
- Concessions cannot be paid to the buyer as cash at closing.
- If the total credit is more than the allowable costs and concessions, the excess is typically reduced or left unused.
- Concessions are not a substitute for required repairs. MPR repairs called for by the VA appraisal generally have to be completed, not just credited.
Hypothetical examples
The figures below are round illustrations only. They are not typical costs, quotes or prices for any Reno home.
| Hypothetical item | Example A | Example B |
|---|---|---|
| VA appraised value | $400,000 | $600,000 |
| 4% concession cap | $16,000 | $24,000 |
| Normal closing costs paid by seller (outside the cap) | $6,000 | $8,000 |
| Prepaids paid by seller (counts) | $3,000 | $5,000 |
| Funding fee paid by seller (counts) | $0 (buyer is exempt) | $12,900 |
| Buyer credit card paid off (counts) | $2,000 | $0 |
| Total counted toward cap | $5,000 of $16,000 | $17,900 of $24,000 |
In Example A, a buyer exempt from the funding fee because of a VA disability rating gets closing costs, prepaids and a small debt payoff covered, while using less than a third of the cap. In Example B, the seller pays the 2.15% first-use funding fee along with prepaids; the total is still within the 4% limit, and the normal closing costs are outside it entirely. In both cases the seller agreed in negotiation. Nothing requires a seller to offer concessions.
Common misconceptions
“The seller can only pay 4% of my costs.”
No. Normal closing costs and market-appropriate points are outside the cap. The 4% applies only to concessions.
“Asking for concessions makes my offer weaker.”
It depends on the home. On a listing that has been sitting, a reasonable credit request is normal. On a home with heavy interest, a large request can hurt. Your agent should read the situation listing by listing.
“I can use concessions to get cash back.”
No. Concessions offset specific costs. Your earnest money, however, is credited back at closing and any excess is generally refunded; see how earnest money works on a VA loan.
“Concessions can cover the down payment.”
No. Seller help cannot be used as the down payment. With a $0-down VA loan this rarely matters, but it comes up for buyers with partial entitlement who need to put some money down.
For the broader context of how concessions fit into competitive VA offers, see the Reno VA buyer’s guide. To see where concessions show up in your cash-to-close, the VA home buying steps and costs for Reno page breaks it down, and veterans with a disability rating should read about funding fee exemptions and Nevada benefits for veterans.
The bottom line
VA seller concessions are capped at 4% of the home’s VA appraised value, but the buyer’s normal closing costs and market-appropriate points do not count toward that cap. Concessions can cover the funding fee, prepaids and certain debt payoffs, but not cash back or a down payment. Know which bucket each cost falls into, and have your lender confirm the numbers before you negotiate.