Seller Credits in San Diego: How They Work and How Much Fannie Mae Allows

A seller credit is money the seller agrees to put toward the buyer's costs at closing, and on a Fannie Mae conventional loan the amount is capped at 3%, 6% or 9% of the price depending on how much you put down. The cap applies to the lower of the sales price or the appraised value, and the credit can pay closing costs and prepaids but not the down payment.

What a seller credit is

In an offer, a seller credit is a negotiated amount the seller gives you at closing, so you bring less cash to the table. Fannie Mae's Selling Guide calls these interested party contributions. The rules below come from its topic B3-4.1-02, which was dated May 7, 2025 when I checked it, and they apply to loans sold to Fannie Mae. Other loan types, such as FHA, VA and jumbo loans, have their own limits, and I have not covered those here.

The limits by down payment

Fannie Mae sets the maximum based on the loan-to-value ratio, and it measures the limit against the lower of the sales price or the appraised value, not the loan amount.

Occupancy	Loan-to-value	Maximum credit
Primary residence or second home	Over 90%	3%
Primary residence or second home	75.01% to 90%	6%
Primary residence or second home	75% or less	9%
Investment property	All ratios	2%

As an example, on a $900,000 purchase with 10% down, the loan-to-value is 90%, which falls in the 6% tier. That means up to $54,000 in credits is allowed, as long as the credit does not exceed the buyer's actual closing costs. With less than 10% down, the cap is $27,000 on the same price, and with 25% or more down it is $81,000. These are illustrations only, and your lender will confirm what applies to your loan. If you put down less than 20%, remember that you may also owe private mortgage insurance.

What a credit can and cannot pay for

• Allowed: your closing costs, including prepaids such as the first year of insurance and prepaid interest.
• Allowed: HOA assessments for periods after settlement, limited to 12 months.
• Not allowed: your down payment.
• Not allowed: financial reserves or any minimum contribution the loan requires from your own funds.

The credit also cannot be bigger than your total closing costs. If the amount is higher, the excess is treated as a sales concession, not a credit. To see what those costs usually include, read my closing costs guide.

What happens if a credit is too high

Fannie Mae's rule says anything above the maximum is treated as a sales concession. Sales concessions are deducted from the sales price, and the loan-to-value ratios are recalculated using that lower price or the appraised value. In plain terms, an oversized credit can change the numbers your loan is built on.

The guide also lists things that count as sales concessions, such as cash or cash-like gifts, furniture, automobiles, decorator allowances and moving costs from an interested party. Anything of that kind has to be disclosed, because the Selling Guide says undisclosed credits make a loan ineligible for sale. A seller-paid home warranty is one example of a deal term to raise with your lender before you rely on it.

Who counts as an interested party

The rule lists the property seller, the builder or developer, the real estate agent or broker, any affiliate of those parties, and any party that can benefit from a sale at the highest price and influence the price or transaction. A lender or employer is not an interested party unless it is the seller or is affiliated with one.

Two details help buyers. A credit from the lender's premium pricing is not an interested party contribution. And a rate buydown funded by an interested party does count toward the limit, which matters when you negotiate the structure in my buydowns and points guide.

How credits work in an offer

A credit is one more term, along with price, timing and contingencies. If the home needs repairs, a credit is one tool and a renovation loan is another. In a competitive situation, a request for a credit can make an offer weaker, and in a slower situation it can be a reasonable way to bridge a gap. Your loan program, your cash and your lender's approval decide what is allowed. I cover the offer side in how to win a multiple offer situation.

Before you write an offer that asks for a credit, ask your lender to confirm the limit for your loan and your down payment. Then ask for a Loan Estimate that shows how the credit lowers your cash to close. I explain that form in reading your Loan Estimate and Closing Disclosure.

My advice for San Diego buyers

1. Ask your lender for the credit limit on your specific loan before you write the offer.
2. Compare the credit to what a lower price would do to your payment and your cash to close.
3. Make sure every credit and every concession is disclosed on the contract.
4. Remember that a credit cannot cover your down payment or required reserves.
5. Ask the lender to show the credit on your Loan Estimate and your Closing Disclosure.

A note on advice

I am a REALTOR®, not a lender, attorney, tax professional or financial advisor, so this guide is general information. Your lender can tell you what you qualify for, and a CPA or attorney can answer tax and legal questions.

Related guides

• Home Warranties in San Diego: What They Cover and What to Check Before You Buy One
• Renovation Loans in San Diego: How a HomeStyle Mortgage Pays for Repairs
• PMI in San Diego: How Private Mortgage Insurance Works and When It Ends
• Loan Estimate vs. Closing Disclosure: How to Read Your Mortgage Documents in San Diego
• How Much Are Closing Costs When Buying a Home in San Diego?
• How Much Down Payment Do You Need to Buy a Home in San Diego?

Frequently asked questions

How much can a seller credit be on a conventional loan?

On a primary residence or second home, Fannie Mae allows 3% with a loan-to-value over 90%, 6% from 75.01% to 90%, and 9% at 75% or less. Investment properties are limited to 2%.

What can a seller credit pay for?

It can pay the buyer's closing costs, including prepaids, and up to 12 months of HOA assessments after settlement.

Can a seller credit pay for my down payment?

No. Fannie Mae does not allow interested party contributions to be used for the down payment or financial reserve requirements.

Who is an interested party?

The seller, the builder or developer, the real estate agent or broker, and their affiliates are interested parties under the rule.

What if the credit is more than the limit?

The excess is treated as a sales concession, which is deducted from the sales price, and the loan-to-value is recalculated.

About the author

Trevor Landress is a San Diego REALTOR® with Coldwell Banker West (DRE# 02126901). He was born and raised in San Diego and has been licensed since 2021.

Trevor helps homeowners sell, guides first-time buyers through the home buying process and assists investors with their next acquisition. His work includes negotiating offers, analyzing market trends, building pricing strategies and running marketing campaigns for his listings.

He serves clients across San Diego County, from coastal communities like La Jolla, Del Mar and Carlsbad to neighborhoods inland.

Trevor is part of the Campbell Group, a three-generation real estate team, and he and the Campbell Group consistently rank as a top producing team at Coldwell Banker West each month. He writes these guides to help San Diego buyers and sellers navigate an ever-changing market. To talk through your plans, call or text (619) 402-4614 or contact Trevor Landress.

How I help San Diego home buyers

I help buyers sort out their budget, understand their loan options with a lender, search for homes, write and negotiate offers, keep track of inspection and contingency deadlines and stay organized through closing.

How I help San Diego home sellers

I help sellers price their home, prepare it for the market, market it to buyers, review and negotiate offers and manage the steps from an accepted offer to closing.

Rules and official pages

• Fannie Mae Selling Guide: B3-4.1-02, Interested Party Contributions