By Joe Nelson — Retired Air Force, Nelson Home Group Team Leader and Mortgage Loan Originator
Almost everyone gets VA seller concessions backwards. They assume the seller paying their closing costs eats up the 4 percent cap, when VA does not count ordinary closing costs or normal discount points as concessions at all, and they assume the little stuff is harmless, when paying off the buyer’s credit card or funding a temporary rate buydown counts against the cap dollar for dollar. VA’s own position is blunt: “We don’t limit credits for a loan’s closing costs, but we do limit seller’s concessions to no more than 4% of your home’s reasonable value” (U.S. Department of Veterans Affairs, VA funding fee and closing costs, verified September 16, 2026).
For entitlement, the funding fee, appraisals and everything else that shapes a VA purchase in this market, start at our veterans hub.
What exactly is a VA seller concession?
A concession is something of value the seller gives the buyer that is not a normal cost of getting the loan closed, and VA caps the total at 4 percent. VA’s lender training defines the boundary tightly: “VA allows a 4% seller concession fee but it consists of only these items,” then lists payment of the veteran buyer’s funding fee, payment of the veteran buyer’s prepaid items such as proration of real estate tax and hazard insurance, payment of points above what is appropriate to the market, gifts such as televisions or cars, payment of points to provide for a temporary buydown and payoff of credit balances or judgments on behalf of the veteran (U.S. Department of Veterans Affairs, VA Credit Standards Course). That is the whole universe. If a seller contribution is not on that list, it is not a concession, and it does not touch the cap. The base for the calculation is the established reasonable value of the property, which is the number on the VA Notice of Value, not the sale price and not the loan amount.
Do my closing costs count against the 4 percent cap?
No, and this is the single most valuable thing on this page. VA’s credit standards training says it directly: “All of the other closing costs, e.g. the title insurance, title exam, Mortgage Electronic Registration System (MERS) fee, appraisal, origination fee, normal discount points, etc., can be paid by the seller and they don’t count toward the concession.” VA’s public page says the same thing in plain language, that VA does not limit credits for a loan’s closing costs. So a seller who agrees to pay every allowable closing cost on your Closing Disclosure has not spent a penny of your 4 percent, and you still have the full 4 percent available for the funding fee, prepaid items or a buydown if you need them. I have watched veterans leave money on the table because their agent believed a 4 percent ceiling applied to the whole seller credit. It does not. If you want the closing cost side broken out line by line, we did that in how Kansas City veterans actually pay VA loan closing costs.
Do discount points count against the cap?
Normal discount points do not. VA’s training explicitly lists “normal discount points” among the items a seller can pay without touching the concession cap, which means a seller funded permanent rate buydown priced at market is treated as a closing cost rather than a gift. Two exceptions bite. Points above what is appropriate to the market count as a concession, because at that point the seller is transferring value beyond the cost of the rate. And escrowed funds used for a temporary buydown count in full, because VA lists “payment of points to provide for a temporary buy-down” as a concession item. That distinction matters in a rate environment where temporary buydowns get pitched hard. A permanent buydown at market pricing is usually the cleaner ask under VA rules, and it is also the one that keeps helping you in year three and year ten. Compare how the same dollars behave on the conventional side in VA loan versus conventional in Kansas City.
Does the seller paying my funding fee count?
Yes, in full. VA lists payment of the veteran buyer’s funding fee first among the items that constitute a concession, so if a seller agrees to cover a 2.15 percent first use funding fee, you have just consumed most of your 4 percent allowance in one move. That is not automatically a bad trade, but it is usually an unnecessary one, because the funding fee is the only cost VA permits you to finance into a purchase loan. Rolling it into the balance costs you a little interest and preserves your concession room for prepaid items or a buydown, which can be worth more. If you are exempt from the fee because you receive VA compensation for a service connected disability, are eligible for it while drawing retirement or active duty pay, receive Dependency and Indemnity Compensation as a surviving spouse, hold a proposed or memorandum rating before closing, or document a Purple Heart on active duty, this question never arises. We lay out the fee and the exemptions on VA loan costs and the funding fee.
Can a seller pay off my debts or give me something extra?
They can, and both count against the 4 percent. VA’s list includes payoff of credit balances or judgments on behalf of the veteran and gifts such as new televisions or cars, so a seller who clears a $3,000 collection to help you qualify has spent $3,000 of your concession allowance. Prepaid items are on the same list, meaning the proration of real estate taxes and the hazard insurance premium the seller funds are concessions even though they look like routine closing line items on the statement. That is the trap in reverse. The things that feel like gifts, such as paying a debt, are correctly treated as gifts, and the things that feel routine, such as prepaids, are also gifts under VA’s definition, while the things people assume are gifts, such as title insurance and origination charges, are not. Get your loan officer to run the concession math against the Notice of Value before you sign an addendum, not after.
What is the separate 1 percent lender flat charge cap?
It is a different rule with a different purpose, and it limits what your lender can charge you rather than what the seller can pay. Under federal regulation, “a lender may charge and the veteran may pay a flat charge not exceeding 1 percent of the amount of the loan, provided that such flat charge shall be in lieu of all other charges relating to costs of origination not expressly specified and allowed in this schedule” (38 CFR 36.4313). In practice that means the lender either takes a flat 1 percent origination and absorbs its own processing, underwriting and document fees, or it itemizes only the specific charges the regulation allows. The same section permits reasonable and customary amounts for the VA appraisal and compliance inspections, recording fees and taxes, the credit report, the borrower’s share of current year taxes and assessments, required hazard insurance, a survey if required, title examination and title insurance and flood zone determination. Anything outside that list, including brokerage or service charges against the borrower, is not permitted.
How should I actually negotiate concessions in Kansas City?
Ask for a specific dollar figure tied to a purpose, ask for it as a closing cost credit wherever the rules allow and understand that a listing agent reads your ask as risk. The 4 percent is a ceiling, not a target, and in a multiple offer situation a large concession request is functionally a price reduction the seller has to net against every competing offer. A seller weighing your offer at full price with a $12,000 credit against a slightly lower offer with no credit is comparing net proceeds, and yours can lose even though the headline number is higher. The stronger play in most of our market is a clean structure: a modest credit sized to your actual cash gap, a preapproval the listing agent can verify, a realistic closing date and no request for the seller to pay the funding fee you could have financed. We go deeper on positioning in how VA buyers win multiple offers, and if you are still deciding where to make that offer, our featured communities pages cover the towns across the ten county area we serve.
Who this applies to and who it does not
This page describes VA rules only. FHA runs a different and broader system, where interested parties may contribute up to 6 percent of the sales price and that 6 percent limit includes origination fees, other closing costs, prepaid items, discount points, rate buydowns and the upfront mortgage insurance premium (FHA Single Family Housing Policy Handbook 4000.1, last revised August 12, 2026). Conventional financing has its own interested party contribution limits set by the investor rather than by VA, so do not carry the 4 percent number across. The cap also does not create an entitlement. Nothing obligates a seller to give you anything, and in a market with limited inventory the concession you can negotiate depends entirely on how long the home has been listed and how many other buyers are looking at it. One more note on who I am in this conversation: I hold both a real estate license and a mortgage originator license and cannot serve in both roles on the same transaction, so treat this as education rather than an offer of credit, and get your own loan estimate.
Frequently asked questions about VA seller concessions
Can the seller pay my VA funding fee?
Yes, and VA counts it as a concession, so it comes straight out of your 4 percent allowance. Because the funding fee is the only cost VA lets you finance into a purchase loan, most veterans are better off rolling it into the balance and spending their concession room on something the loan cannot absorb. If you are exempt from the funding fee, the question is moot and you keep the full 4 percent for other uses.
Does a seller paid rate buydown count against the 4 percent cap?
It depends on which kind. Normal discount points for a permanent buydown priced at market are treated as a closing cost and do not count, while escrowed funds for a temporary buydown do count, and so do points above what is appropriate to the market. VA lists payment of points to provide for a temporary buydown as a concession item, which is why a permanent buydown is usually the cleaner structure under VA rules.
Can the seller pay off my credit card or a judgment so I qualify?
They can, and VA counts payoff of credit balances or judgments on behalf of the veteran as a concession against the 4 percent. It is a legitimate tool when a single account is blocking your approval, but it is expensive concession room, so talk to your loan officer about whether paying the debt down yourself or restructuring the file gets you to the same approval without spending the allowance.
How much should I ask for without losing the house?
Ask for the smallest number that actually closes your cash gap, and ask for it as a closing cost credit where the rules allow, because VA does not limit credits toward loan closing costs. A seller compares net proceeds across every offer on the table, so a large credit on a full price offer can lose to a lower offer with no credit. In a well priced home with showings still happening, a restrained ask backed by a verifiable preapproval usually holds up better than a big one.
Where can I see homes for sale and current prices in Kansas City?
You can search active listings across the whole ten county, two state area we serve on our Kansas City home search, and our Kansas City living guides break down what each town is actually like before you write an offer. Prices and days on market move constantly, and both drive how much concession room a seller will give, so use the live search rather than any figure printed in an article.
Ready to make the move?
Ready to make the move? Work with the top-rated team serving Kansas City veterans — or call us at 816-680-6624.
Equal Housing Opportunity
Nelson Home Group is committed to the Fair Housing Act. We do not discriminate on the basis of race, color, national origin, religion, sex, familial status, or disability. School district and neighborhood information on this page is provided for factual informational purposes only and does not constitute a recommendation to purchase in any particular area. All buyers are encouraged to independently research neighborhoods, schools, and communities to determine the best fit for their individual needs.
Joe Nelson is a licensed Realtor in Missouri and Kansas, and a licensed mortgage originator in Missouri and Kansas (NMLS #2547018). Joe cannot serve as both Realtor and loan officer on the same transaction. This page is educational and is not an offer of credit or a commitment to lend. Loan products, rates and qualification are subject to underwriting and may change. Eligibility determinations are made by the U.S. Department of Veterans Affairs.