Are rising closing costs making your home search in La Grange Park feel out of reach? You are not alone. Many buyers use seller concessions to lower cash needed at closing without changing their loan program. In this guide, you will learn how seller credits work, the limits by loan type, and practical ways to negotiate them in our western suburbs. Let’s dive in.
What seller concessions are
Seller concessions are amounts the seller agrees to pay on your behalf at closing. They show as credits on the settlement statement and reduce your cash-to-close. The money comes from the seller’s proceeds, not the lender.
What concessions can cover
- Buyer closing costs such as origination, title, escrow, and recording fees
- Prepaid items such as property taxes, homeowner’s insurance, and daily interest
- Discount points to lower your interest rate
- Temporary buydowns, such as a 2/1 or 1/0 buydown, when allowed by your lender
- Some repairs or appraisal and inspection fees, if permitted by your program
What concessions cannot cover
- Your required minimum down payment
- Gift funds that replace your required contribution when not allowed by the program
- Costs unrelated to the transaction after closing
Loan limits by program
Concession caps depend on loan type, occupancy, and loan-to-value ratio. Local lenders can add stricter rules, so always confirm with your lender.
Conventional loan caps
- LTV at or below 75 percent: up to 9 percent of price or appraised value, whichever is less
- LTV above 75 percent and at or below 90 percent: up to 6 percent
- LTV above 90 percent: up to 3 percent
- Investment properties: usually 2 percent regardless of LTV
FHA loan caps
- Up to 6 percent of the lesser of price or appraised value
- Seller cannot pay your required minimum down payment
VA loan caps
- Most seller concessions are limited to 4 percent of the purchase price
- VA allows some additional seller-paid items beyond the 4 percent in certain cases
USDA loan caps
- Generally up to 6 percent of the sales price for allowable costs
Non-QM or local programs
- Limits vary widely; some lenders cap or restrict concessions more than standard programs
Price vs. credit: key differences
A seller concession is not the same as a price reduction. A credit reduces the seller’s net proceeds but keeps the contract price the same. A price reduction lowers the contract price and can change loan-to-value, taxes, commissions, and how the appraisal stacks up.
Appraisal and underwriting effects
- The appraisal controls the maximum loan amount. Credits do not raise appraised value.
- Large credits compared with the market may draw extra underwriting review.
- Lenders document concessions on the closing disclosure and require clear invoices for items like buydowns or repairs.
Qualifying and monthly payment
- Concessions reduce your cash-to-close, which helps if you are funds-limited.
- Seller-paid discount points can lower your rate. Temporary buydowns may not be used for qualifying unless the lender’s rules allow it. Permanent buydowns typically affect your qualifying rate under program guidelines.
Real examples with numbers
Use these simple scenarios to visualize how it works. Numbers are illustrative.
Example A: Conventional, low down payment
- Price: $400,000
- Down payment: 5 percent = $20,000
- LTV: 95 percent, so cap is 3 percent = $12,000
- If the seller gives a $12,000 credit, you still bring your $20,000 down payment and any costs above $12,000. Seller’s net before other costs becomes $388,000.
Example B: FHA, same price
- Price: $400,000
- Cap: 6 percent = $24,000
- Minimum down payment: 3.5 percent = $14,000 (buyer-funded)
- A $24,000 credit can significantly reduce cash-to-close while you still provide your required down payment.
Example C: Rate buydown as a concession
- Price: $350,000
- Seller pays about 2 points to permanently reduce your interest rate
- If allowed by the program, the lower note rate can help with qualifying. Temporary buydowns are handled differently by many lenders.
Negotiation strategies in La Grange Park
Your approach should reflect neighborhood activity, price band, and appraisal risk in the western suburbs.
- Request a specific dollar credit tied to closing costs and prepaids. This is easier for lenders to underwrite than vague language.
- Consider a seller-paid buydown to manage payments, especially early years.
- If the home is likely to appraise, you can offer a slightly higher price in exchange for a larger credit. Use caution, since a low appraisal limits the benefit.
- Trade flexibility, such as a quicker close, in exchange for a credit.
- Ask the seller to cover specific line items, such as title or transfer fees, if a lump sum is a sticking point.
Sample offer language
- “Seller to provide a credit of $X at closing toward buyer’s closing costs and prepaids, per lender guidelines.”
- “Seller to pay up to $X toward buyer’s discount points to permanently buy down the interest rate.”
- “Seller concession of $X toward buyer closing costs contingent upon full appraisal at or above contract price.”
Questions to ask your lender
- Which loan programs fit my situation, and what concession caps apply for each?
- Can I use concessions for prepaids, escrows, and discount points? Are there exclusions?
- How will a temporary versus permanent buydown affect qualifying?
- Do you have any overlays that limit concessions below program caps?
- How will a credit versus a price reduction change my LTV, appraisal, and ratios?
- What documentation do you need for any credits or buydowns?
Questions to ask your agent
- Given recent comps in La Grange Park, is a credit or a price cut safer for appraisal?
- What is the seller’s likely flexibility on concessions at this price point?
- Can we model the seller’s net proceeds so our offer is easy to accept?
- Would asking for specific fees instead of a lump sum make the offer stronger?
- How will a concession request compare to competing offers with no credits?
Local Cook County factors
- Property tax proration: Cook County tax timing and prorations can affect prepaids and your cash-to-close. Ask your lender and attorney to estimate these accurately.
- HOA and condo items: Transfer fees or reserves may be paid by the seller if allowed. Confirm in the association documents early.
- Local lender overlays: Many west-suburb banks and credit unions add program-specific rules. Confirm caps and buydown treatment with your exact lender.
Simple buyer checklist
- Define your cash-to-close target before you shop.
- Ask your lender to show scenarios with and without seller credits, including rate buydowns.
- Decide if a credit or price cut better supports your goals.
- Align the concession request with likely appraisal outcomes.
- Use precise offer language and confirm program caps in writing.
A smart concession strategy can help you secure the right La Grange Park home while keeping more cash in your pocket at closing. If you want help modeling credits, buydowns, and appraisal risk in our western suburbs, we are here to guide you from offer to close. Reach out to The Tully Team for local, step-by-step advice on your next move.
FAQs
What are seller concessions in Illinois home purchases?
- Seller concessions are seller-paid credits at closing that reduce your cash-to-close by covering allowable costs such as closing fees, prepaids, and discount points.
How much can a seller pay on a conventional loan?
- Caps depend on LTV: typically 3 percent above 90 percent LTV, 6 percent between 75 and 90 percent LTV, and 9 percent at or below 75 percent LTV.
Can seller concessions cover my down payment?
- No. Programs require you to provide the minimum down payment from acceptable sources; seller credits cannot replace it.
Do seller concessions affect appraisal in La Grange Park?
- Credits do not raise appraised value; the appraisal still sets the maximum loan amount and can limit the benefit if it comes in low.
Are rate buydowns a good use of concessions?
- They can be. Seller-paid points that permanently reduce the rate may help qualifying and long-term savings, subject to program rules.
When is a price reduction better than a credit?
- A price cut can lower loan amount and appraisal risk, while a credit lowers cash-to-close but keeps price the same; choose based on your goals and lender guidance.
What should I ask my lender before requesting credits?
- Ask about concession caps, allowed uses, buydown treatment for qualifying, overlays, and how credits versus price cuts change LTV and monthly payment.
