Combining Seller Credits and 5% Down on a $900K Conventional Loan

When you’re shopping for a home in today’s competitive market, every dollar counts. If you’re considering buying a $900,000 property with a conventional loan, the option to combine seller credits with a 5% down payment could help reduce your out-of-pocket costs—and make homeownership more attainable.

In this article, we’ll explore how this strategy works, what the guidelines are, and how you can maximize your savings with smart financial planning.

What Are Seller Credits?

Seller credits, also known as seller concessions, are funds the seller agrees to contribute toward the buyer’s closing costs. These can include:

• Loan origination fees
  
• Title insurance
  
• Appraisal fees
  
• Discount points
  
• Escrow and prepaid items
  

By reducing your upfront expenses, seller credits can make a significant difference—especially when you’re already stretching to make a 5% down payment on a high-cost home.

Want to understand how seller credits work in your local market? Speak with a loan advisor today.

5% Down on a $900,000 Home: What Does It Look Like?

A 5% down payment on a $900,000 home equals $45,000. While conventional loans typically require at least 5% down, there are additional cost considerations, such as:

• Private Mortgage Insurance (PMI)
  
• Closing costs (typically 2%–5% of the home price)
  
• Escrow reserves
  

Here’s a simplified cost breakdown:

This is where seller credits come in—if the seller agrees to contribute $20,000 in credits, your required cash to close could drop to $52,000.

How Much Can Sellers Contribute?

Fannie Mae and Freddie Mac set limits on how much a seller can contribute based on your down payment and occupancy type:

• Primary residence, down payment < 10%: Up to 3% of the purchase price
  
• Investment properties: Up to 2%
  
• Primary residence, down payment ≥ 10%: Up to 6%
  

So with a 5% down payment, you’re allowed a maximum of 3% in seller credits, which equals $27,000 on a $900,000 home.

Use our mortgage calculator to estimate your monthly payment and see how seller credits can lower your closing costs.

Combining 5% Down and Seller Credits: Key Benefits

1. Lower Upfront Costs
   With seller credits, you can preserve more of your savings for future needs, such as home improvements or an emergency fund.
   
2. Increased Affordability
   In high-cost markets, every reduction in upfront costs helps buyers stay competitive without overextending financially.
   
3. Strategic Negotiation
   A seller credit can be negotiated in lieu of a price reduction—beneficial when both parties want to close the deal smoothly.
   

Tips for Buyers

• Work With a Knowledgeable Lender: They’ll help structure your loan to ensure you stay within contribution limits.
  
• Understand Appraisal Impacts: Seller credits must not exceed actual closing costs. Also, the home must appraise for the full purchase price.
  
• Get Pre-Approved: Knowing your eligibility with a 5% down payment gives you leverage during negotiations.
  

Ready to start your home search? Get pre-approved in minutes and learn how to optimize your purchase strategy.

FAQ: 5% Down & Seller Credits on a $900K Home

Read Next

• How to Buy a Home With 3% Down: What You Need to Know
  
• Closing Costs Explained: What Every Homebuyer Should Expect
  
• The Pros and Cons of Seller Concessions
  

Combining a 5% down payment with seller credits can be a savvy way to lower your entry cost into homeownership—especially on a high-value home like one priced at $900,000. By understanding contribution limits and working with experienced professionals, you can make a well-informed, financially sound decision.