VA Seller Concessions 2026: Rules, Limits, and the VA 4% Rule Explained
VA seller concessions are extra costs a seller can cover to help a veteran using a VA Loan. In 2026, the VA allows sellers to pay specific concession items up to 4% of the home’s price, plus standard closing costs with no VA percentage cap. This guide explains the 4% rule, what counts as a concession, what does not, and how the JD.Mortgage team at PRMG helps veterans, agents, builders, and sellers structure these correctly across 49 states.
For a full overview of how VA Loans work, start here: Learn about VA loans.
Seller Concessions vs. Seller Contributions (Why They Are Not the Same)
Many buyers, agents, and builders mix up “seller concessions” and “seller contributions.” The VA does not. Only certain items fall under the 4% seller concession limit. Everything else is treated as normal seller contributions or seller-paid closing costs, which the VA does not cap by percentage.
| Type | VA Limit? | What It Can Cover |
|---|---|---|
| Seller Concessions | Yes – capped at 4% of price | • Paying off buyer debts (credit cards, auto loans, personal loans) • Paying off collections or judgments • Lease buyouts from the buyer’s current home • Paying the VA Funding Fee • Buyer incentives (appliances, upgrades, repair allowances) • Prepaid mortgage payments (one or more months) • Extra prepaid taxes and insurance beyond normal levels • Costs for temporary rate buydowns (such as a 2-1 buydown) |
| Seller Contributions | No VA percentage cap | • Standard closing costs • Title, escrow, and settlement fees • Recording fees • Permanent discount points to buy down the rate • Lender fees that meet VA guidelines |
The VA only limits concession items. Seller-paid closing costs and permanent discount points fall outside the 4% cap, which creates more flexibility than most people realize.
The VA 4% Seller Concession Rule (2026)
The VA 4% rule means sellers may contribute up to 4% of the home’s purchase price toward concession items only. These items are above and beyond normal closing costs. The 4% limit cannot be used as a down payment and cannot be applied to costs the VA does not allow.
| Home Price | Max Allowed Seller Concessions (4%) |
|---|---|
| $300,000 | $12,000 |
| $450,000 | $18,000 |
| $600,000 | $24,000 |
| $850,000 | $34,000 |
What Counts Toward the 4% VA Seller Concession Limit?
The 4% cap applies only to specific items the VA defines as concessions. These go beyond normal closing costs and directly benefit the buyer in ways other than simple fees:
- Paying off consumer debts such as credit cards, auto loans, and personal loans
- Paying off collections or judgments needed for loan approval
- Lease buyouts from the buyer’s current residence
- Paying the VA Funding Fee
- Buyer incentives such as appliances, upgrades, or repair allowances
- Prepaid mortgage payments (one or more future payments)
- Extra prepaid taxes and insurance beyond normal closing amounts
- Costs for temporary rate buydowns (such as a 2-1 buydown)
These items fall under VA’s definition of “concessions” and must stay within 4% of the purchase price.
VA Seller Concessions vs. Seller-Paid Closing Costs (Side-by-Side)
The 4% rule does not limit what a seller can pay in standard closing costs. The chart below shows how the concession cap works alongside seller-paid closing costs under VA rules.
| Sales Price | 4% Seller Concessions (Capped) | Seller-Paid Closing Costs (Not Capped by VA) |
|---|---|---|
| $400,000 | Max Allowed: $16,000
Can Include: |
No VA Limit
Can Include: |
| $600,000 | Max Allowed: $24,000
Can Include: |
No VA Limit
Can Include: |
| $850,000 | Max Allowed: $34,000
Can Include: |
No VA Limit
Can Include: |
This is the key difference: the 4% limit only applies to concession items, including temporary rate buydowns. Normal closing costs and permanent discount points have no VA percentage cap when they follow VA and lender guidelines.
What Does NOT Count Toward the 4% Limit?
These costs are not part of the 4% rule and may be paid by the seller separately:
- Standard closing costs (title, escrow, settlement, and recording fees)
- Lender fees that meet VA guidelines
- Permanent discount points used to lower the interest rate
To estimate how different rate options and discount points impact the monthly payment, use this tool: Estimate your payment.
VA Seller Concessions vs. Seller Credits
Seller concessions follow the 4% rule. Seller credits do not, unless they are used for concession items. In many contracts, seller credits are used mainly to cover normal closing costs, prepaid taxes, and insurance without touching the 4% concession cap. When credits are used for concession items, those amounts count toward the 4% limit.
| Type | Counts Toward 4%? | Typical Use |
|---|---|---|
| Seller Concessions | Yes | Debt payoffs, VA Funding Fee, incentives, prepaid mortgage payments, temporary buydown costs |
| Seller Credits | Only if used for concession items | Standard closing costs and prepaid items, or sometimes concession items if structured that way |
For more on common VA myths and misunderstandings, review this guide: VA loan benefits and misconceptions.
Examples of VA Seller Concessions in 2026
Example 1: Paying Off a Small Collection and a Credit Card
A veteran buying a $400,000 home has a $1,200 medical collection and a $3,000 credit card balance that must be paid for approval. The seller can use up to $16,000 in concessions to cover both debts and still have room left in the 4% cap for other items.
Example 2: Funding Fee and Lease Buyout Covered by Seller
A veteran owes a VA Funding Fee of $9,000 and has a $4,000 lease buyout due to move from a rental. Both can be paid as seller concessions. On a $450,000 home, the 4% cap is $18,000, so these items fit within the limit and still leave space for other concession items if needed.
Example 3: Temporary Rate Buydown Paid by Seller
The seller pays for a temporary rate buydown, such as a 2-1 buydown, to lower the veteran’s payment in the first years. Under VA rules, temporary buydown costs are treated as seller concessions and do count toward the 4% concession limit.
This is different from permanent discount points, which are treated as standard closing costs and do not count toward the 4% cap.
How VA Seller Concessions Affect the Loan
- They do not change the appraised value of the home.
- They do not change the veteran’s basic or bonus entitlement.
- They cannot be used as a down payment.
- They may reduce the cash the veteran needs to bring to closing.
For a deeper look at how income, debts, and obligations factor into VA approvals, see this guide: See residual income basics.
Frequently Asked Questions (2026)
What is the VA seller concession limit for 2026?
The VA allows sellers to contribute up to 4% of the home’s purchase price toward concession items such as debt payoffs, funding fees, lease buyouts, temporary buydown costs, and incentives. This 4% cap is in addition to any seller-paid standard closing costs.
What counts toward the VA 4% rule?
Items like paying off credit cards, auto loans, collections, lease buyouts, the VA Funding Fee, buyer incentives, prepaid mortgage payments, extra prepaid taxes and insurance, and temporary rate buydown costs count toward the 4% VA seller concession limit.
Can sellers pay all closing costs on a VA Loan?
Yes. Standard closing costs are separate from the 4% rule and may be paid by the seller, subject to the contract, lender overlays, and state rules.
Can a seller pay off a buyer’s debt on a VA Loan?
Yes. Sellers may pay off consumer debts such as credit cards, auto loans, or collections, and those items are treated as concessions that apply to the 4% cap.
Do discount points count toward the 4% limit?
No. When used within VA and pricing guidelines, permanent discount points are treated as standard closing costs, even when several points are used to buy down the rate, and they do not count toward the 4% concession cap.
Can seller concessions cover the VA Funding Fee?
Yes. The VA Funding Fee may be paid by the seller, but it is treated as a concession and counts toward the 4% limit.
Do VA seller concessions affect the appraisal?
No. VA appraisals are based on market value and are not increased or decreased because seller concessions or credits are present.
Are seller concessions required on VA Loans?
No. Seller concessions are optional. They must be negotiated into the purchase contract, agreed to by all parties, and approved by the lender.
Can concessions be used for temporary rate buydowns?
Yes. Temporary rate buydowns are allowed under VA rules. Their cost is treated as a concession and counts toward the 4% cap.
Do concession rules vary by state?
No. VA seller concession rules are federal and apply nationwide, even though local closing costs and property taxes can vary by state and market.
What This Means for You
Seller concessions, when used correctly, can help a veteran lower upfront costs, clear problem debts, and structure a smoother move from a current rental or home. At the same time, seller contributions toward standard closing costs and permanent discount points are not capped by the VA’s 4% rule. The JD.Mortgage team at PRMG helps veterans, agents, builders, and sellers design offers that use both tools the right way, without crossing VA limits or creating surprises at closing.
To compare VA Loans with other options like FHA, Conventional, or Non-QM programs, start here: Explore loan options.