How Seller Concessions Work With Down Payment Assistance

Most first-time buyers using down payment assistance focus on one number: the down payment. They find a program that covers it, they get pre-approved, and they start shopping. What many of them don't know is that there is a second significant cost at closing — and a legitimate, widely-used strategy for getting the seller to cover it.

That strategy is seller concessions. And for Michigan DPA buyers who understand how to use them, seller concessions are the piece that turns a near-zero close into a genuinely zero out-of-pocket close.

Here is everything you need to know.

WHAT ARE SELLER CONCESSIONS?

Seller concessions — also called seller-paid closing costs or seller contributions — are funds the seller agrees to contribute toward the buyer's closing costs as part of the purchase agreement.

They are not a gift from a generous seller. They are a negotiated term of the transaction — just like purchase price, inspection contingency, and closing date. The buyer requests them. The seller agrees or counters. The final amount is written into the purchase contract.

When the transaction closes, the seller's contribution is applied at the closing table toward the buyer's closing costs — reducing or eliminating the cash the buyer needs to bring.

WHAT DO CLOSING COSTS INCLUDE?

Closing costs are the fees and expenses associated with completing a real estate transaction beyond the down payment. For Michigan buyers, typical closing costs include:

- Loan origination and underwriting fees

- Appraisal fee

- Title search and title insurance

- State and county transfer taxes

- Prepaid property taxes and homeowner's insurance (escrowed at closing)

- Prepaid mortgage interest (from closing date to end of month)

- Recording fees

- Home inspection (typically paid before closing but worth factoring in)

Total closing costs for a Michigan buyer typically run 2%–5% of the purchase price. On a $185,000 home, that is $3,700–$9,250. On a $220,000 home, $4,400–$11,000.

DPA programs often cover the down payment and part of the closing costs — but not always all of them. Seller concessions fill the gap.

HOW MUCH CAN A SELLER CONTRIBUTE?

The maximum seller concession allowed depends on the loan type:

FHA loans: Up to 6% of the purchase price. On a $185,000 home, that is $11,100 — more than enough to cover all closing costs in most Michigan transactions.

Conventional loans (less than 10% down): Up to 3% of the purchase price.

Conventional loans (10%–25% down): Up to 6%.

Conventional loans (25%+ down): Up to 9%.

USDA loans: Up to 6% of the purchase price — same as FHA.

VA loans: Up to 4% of the purchase price, plus all customary closing costs. VA has specific rules around which fees sellers can pay — confirm the details with your lender.

For most Michigan DPA buyers using FHA — the most common pairing — the 6% seller concession limit provides more than enough room to cover all closing costs on homes in the $130,000–$250,000 range.

HOW SELLER CONCESSIONS COMBINE WITH DPA PROGRAMS

This is where the strategy gets powerful. Here is a typical stacked scenario for a Michigan buyer:

Purchase price: $185,000

Loan type: FHA (3.5% down = $6,475)

MSHDA assistance: $10,000 — covers down payment ($6,475) + $3,525 toward closing costs

Estimated total closing costs: $7,500

Remaining closing costs after MSHDA: $3,975

Seller concession requested: $4,000

Total out of pocket for buyer: $0

In this scenario, MSHDA covered the down payment and partial closing costs. The seller concession covered the rest. The buyer closed without writing a personal check for anything beyond earnest money — which in many cases can also be rolled into the final closing settlement.

This combination — DPA for the down payment, seller concessions for closing costs — is how a significant number of Michigan first-time buyers achieve a true zero-cost close. It is not unusual. It is not a loophole. It is standard practice for buyers who know how to negotiate.

DOES REQUESTING SELLER CONCESSIONS HURT YOUR OFFER?

This is the question most buyers ask — and it deserves a direct answer.

In a buyer's market or on a property that has been sitting for 30+ days: seller concessions are a normal, expected negotiating point. Sellers are motivated. A request for $4,000–$6,000 in concessions on a transaction that gets their home sold is almost always received reasonably.

In a competitive, multiple-offer situation: seller concessions reduce the seller's net proceeds from the sale. In a bidding war, a buyer requesting concessions is at a disadvantage relative to a buyer who doesn't. In these situations, buyers have a choice: compete on cleaner terms and bring more cash to closing, or accept that the concession request may cost them the home.

The practical middle ground: in competitive markets, buyers who can cover closing costs through DPA stacking — without needing seller concessions — are in the strongest possible position. Seller concessions become most useful in situations where DPA alone doesn't fully cover closing costs and the property isn't attracting multiple competing offers.

Your agent's read on the specific property and market is the most important input here. A home that received three offers in its first weekend is a different conversation than one that has been listed for 45 days.

HOW TO STRUCTURE A SELLER CONCESSION REQUEST

Seller concessions are written into the purchase agreement as a specific dollar amount or as a percentage of the purchase price. Common language: "Seller agrees to contribute $X toward buyer's closing costs."

A few important mechanics:

The concession cannot exceed actual closing costs. If you request $6,000 in seller concessions but your actual closing costs are $5,200, you only receive $5,200. The excess doesn't convert to a buyer credit or reduce the purchase price — it simply isn't used. Work with your lender to estimate your actual closing costs before deciding how much to request.

The concession is subject to appraisal. If the home doesn't appraise at the purchase price, the entire transaction is affected — including the seller concession. This is standard for any offer structure, not specific to concessions.

The concession must be disclosed to your lender. Seller concessions are part of the loan file and must be reflected in the Closing Disclosure. Your lender needs to know the amount agreed upon in the contract before they finalize the loan.

Large concessions can trigger lender review. While FHA allows up to 6%, some lenders may scrutinize large seller concessions — particularly if they appear to inflate the purchase price to offset the concession. Keep concession requests at or below what your actual closing costs require.

SELLER CONCESSIONS AND EARNEST MONEY

Earnest money is the deposit a buyer submits with their offer to demonstrate serious intent — typically $1,000–$3,000 or 1%–2% of the purchase price in Michigan. It is applied toward closing costs at closing.

If you have earnest money, your actual need for seller concessions is reduced by that amount. A buyer who puts $2,000 in earnest money and has $7,500 in closing costs needs $5,500 in combined DPA and seller concessions to close with nothing additional out of pocket — not $7,500.

Walk through this math with your lender before you make an offer so you know exactly what to request and how the numbers stack.

A COMPLETE ZERO-COST CLOSE: THE FULL PICTURE

Here is what a complete zero-cost Michigan DPA close looks like with all components in place:

Purchase price: $175,000

Earnest money: $2,000 (applied at closing)

Loan type: FHA (3.5% down = $6,125)

Estimated closing costs: $7,000

MSHDA assistance: $10,000

- Covers: $6,125 down payment + $3,875 toward closing

Remaining closing costs: $3,125 ($7,000 − $3,875 − $0 earnest money applied so far)

Earnest money applied: $2,000

Net remaining: $1,125

Seller concession requested: $1,500 (leaves buffer)

Total additional cash at closing: $0

Earnest money: already paid upfront, recovered at closing

Every dollar accounted for. Zero out of pocket beyond the earnest money deposit — which was recovered at closing.

HOW TO GET STARTED

Download ZeroDownScout to find which DPA programs are active in your Michigan zip code. Knowing your DPA stack going in tells you exactly how much in seller concessions — if any — you need to request to close with zero out of pocket.

Connect with an MSHDA-approved lender who can run the full closing cost estimate for your specific purchase price and loan type. That number, combined with your DPA eligibility, tells you precisely what to negotiate for.

Attend a free OwnTheRoof First-Time Homebuyer webinar. John Collins walks through the seller concession strategy, DPA stacking, and the full closing process in detail in every session.

Seller concessions are a standard negotiating tool. DPA is a funded program. Together they are the combination that gets Michigan buyers to the closing table with nothing left to pay.

Find Your DPA Stack — Then Close With Nothing Out of Pocket

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