VA Seller Concessions: The 4% Rule
A VA seller can pay up to 4% of the price toward certain buyer costs — on top of the normal closing costs a seller can already pay. Knowing what counts toward the 4% and what does not is how buyers keep cash in their pocket without killing the deal.
What the 4% cap actually is
VA rules cap seller concessions at 4% of the established reasonable value of the home — in practice, the lesser of the purchase price or the appraised value. A concession is anything of value the seller gives the buyer beyond what is customary in the market: paying the buyer's VA funding fee, covering prepaid taxes and insurance, or buying the rate down are the classic examples. The cap exists so the price is not quietly inflated to hide the buyer's costs.
Source: VA home loans, VA.gov.
Worked example — a $400,000 purchase
4% of $400,000 = $16,000 in seller concessions available. That $16,000 could, for example, cover a VA funding fee, a year of prepaid insurance and taxes, and discount points to buy the rate down — all without touching the 4% limit, as long as the total stays at or under $16,000. Anything above $16,000 must be cut back or restructured before closing.
What counts toward the 4% — and what does not
Counts toward the 4%
- The buyer's VA funding fee, if the seller pays it
- Prepaid expenses — taxes, insurance and interest paid in advance
- Discount points used to buy the interest rate down
- Payment of the buyer's closing costs beyond what is normal in the market
- Anything else of value the seller gives the buyer that is not customary
Does NOT count toward the 4%
- The real estate commission
- Normal seller-paid closing costs that are customary in the market
- The seller's own costs of selling the home
This is why the distinction matters: a seller who pays customary closing costs is not using up the buyer's 4% at all. The 4% is only for the extras.
Negotiating with the cap in mind
Concessions must be written into the purchase contract — they cannot be added quietly at the closing table. Three things to watch: First, if total concessions exceed 4%, the excess is treated as a reduction in the sales price for VA loan purposes, which can shrink the loan amount. Second, the appraisal still has to support the price; a price inflated to cover concessions can come back short. Third, ask for the concessions in the right order — funding fee and prepaids first, then a rate buydown with whatever room is left — so nothing is wasted on costs you could have paid more cheaply another way.
Douglas runs this math on every VA offer before you sign: the price, the 4% ceiling, and exactly which costs the seller is covering, so there are no surprises at underwriting.
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Frequently asked questions
What counts as a seller concession on a VA loan?
Anything of value the seller gives you beyond what is customary in the market — paying your VA funding fee, covering prepaid taxes and insurance, buying your rate down with discount points, or paying closing costs beyond the normal amount. The total of all concessions cannot exceed 4% of the home's reasonable value.
Does the 4% include the real estate commission?
No. The commission and other normal seller-paid closing costs that are customary in the market do not count toward the 4%. The cap only applies to the extras.
Can the seller pay my VA funding fee?
Yes — and it is one of the most common uses of concessions. The funding fee counts toward the 4%, so on a $400,000 purchase a $9,200 funding fee would use a little over half of the $16,000 available.
What happens if the seller offers more than 4%?
The excess is treated as a reduction in the sales price for VA loan purposes, which can reduce the loan amount. In practice the contract is usually restructured before closing so the concessions fit under the cap.
Do concessions affect the appraisal?
They can. The appraiser considers concessions when valuing the home, and a price inflated to cover them can come back short. Douglas checks the price against the 4% ceiling before you sign so the appraisal is not a surprise.
Can I combine seller concessions with a rate buydown?
Yes. Discount points paid by the seller count toward the 4%, so a buydown fits inside the same ceiling as the funding fee and prepaids. Douglas will show you which combination saves you the most before you make the offer.
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"Douglas did an excellent job from start to finish! I was buying my first home and didn't know the process, but Douglas made it easy and explained everything. He's quick to answer any questions and kept me up to date every step of the way. I would highly recommend Douglas to anyone looking to buy a home!" — Jason Haglund, July 31, 2026
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Equal Housing Opportunity. Mortgage services are provided by Douglas Wilkerson, Branch Manager and Mortgage Broker with Edge Home Finance Corporation. Loan programs, rates, eligibility, underwriting guidelines and availability are subject to change. All applications are subject to credit review, verification, property eligibility, applicable underwriting requirements and final approval. This website does not constitute a commitment to lend or a guarantee of financing.