What Can Louisville Homebuyers Ask a Seller to Pay For?

By Tim Hollinden, Broker Associate | The Hollinden Team at eXp Realty

Quick Answer

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In most Louisville purchases, a buyer can ask the seller to pay toward their closing costs and prepaid items. That covers lender fees, title charges, the first year of homeowners insurance and property-tax escrow, and even discount points to lower the interest rate. Buyers can also ask a seller to pay for a home warranty, all or part of their own agent's fee, or a credit after the inspection. Seller money can't cover your down payment, and it can't put cash back in your pocket. Your loan program caps how much the seller can contribute. Whether a seller says yes usually depends on how much competition the home has.

What You'll Learn

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• What a seller can pay for on a buyer's behalf
• What seller money can't be used for
• How loan programs limit what a seller can contribute
• Why asking for more than your actual costs doesn't help you
• How a seller credit interacts with the appraisal
• When a request strengthens an offer and when it quietly weakens one

Tim's Take

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Most buyers are surprised to learn they can ask the seller to pay for anything at all. The next question is usually "How much can I ask for?" The honest answer is that what's allowed is the easy part. The harder part is what makes sense for this house, at this moment, with this seller.

In my experience, the request is rarely the problem. The problem is making it on the wrong house at the wrong time. Asking a seller to help with closing costs on a home that's been on the market for a while is a perfectly reasonable conversation. The same request on a home that drew several offers its first weekend can take you out of the running without anyone telling you why.

So I handle it the way I handle every other part of an offer. I look at the evidence on that specific home, I get real numbers from the lender, and then I decide what to ask for and how to ask.

What a Seller Can Pay For

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When people say "seller concessions" or "seller-paid closing costs," they usually mean money the seller agrees to put toward the buyer's costs at closing. In the purchase contract it's typically written as a specific dollar amount the seller will pay toward the buyer's closing costs and prepaid items.

That money can usually go toward:

• Your closing costs. Lender fees, the appraisal, title and settlement charges, recording fees, and the other third-party costs that come with getting a loan and transferring a home. If you want the full picture of what those are, I walk through them in Closing Costs Explained for Louisville Buyers.
• Your prepaid items. This is the part buyers forget. At closing you'll usually prepay your first year of homeowners insurance, fund an escrow account for property taxes and insurance, and pay some interest up front. These can be a meaningful number, and seller money can generally be applied to them.
• Discount points. Some buyers would rather have the seller's money go toward lowering their interest rate than toward fees. Paying points to buy down the rate is generally an allowable use. Whether it's the right use depends on how long you plan to keep the loan, which is worth working through with your lender before you write the offer.
• Your owner's title insurance policy. In Louisville the buyer customarily pays for their own owner's title policy, but it's one of the costs a seller sometimes agrees to cover as part of the negotiation.
• A home warranty. Asking the seller to pay for a one-year home warranty is common, and it's often an easy yes because the cost is modest and predictable.
• Your agent's fee. Since the industry changes in 2024, a buyer signs a written agreement with their agent that spells out how the agent is paid. You can ask the seller to cover all or part of that fee as part of your offer. Sellers aren't obligated to agree, but it's a normal part of the negotiation.

How the request is written matters, because a seller can help in two different ways:

• The seller pays your agent's compensation directly. The amount is spelled out in the contract and paid to your agent's brokerage at closing.
• The seller gives you a general credit, and you use it toward your own costs, including what you owe your agent.

These may look like the same money, but loan programs don't always treat them the same way. In general, the major programs have said that a seller paying the buyer's agent directly, when it's reasonable and customary, doesn't count against the limits on seller-paid closing costs. A general credit to the buyer is a different situation. Depending on the loan, it may count toward those limits, it may come with its own documentation requirements, or it may be restricted. Ask your lender how your loan handles each approach before the offer is written, not after.

What Seller Money Can't Do

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There are a few lines that seller money doesn't cross, regardless of how generous the seller is.

• It can't cover your down payment. Loan programs require the down payment to come from the buyer's own funds or other eligible sources, not from the seller. This catches people off guard more often than you'd think. If down payment is the hurdle, start with the down payment myths I see Louisville buyers believe. The answer may be different from what you're expecting.
• It can't put cash in your pocket. A seller credit pays costs. It isn't a rebate. If the credit is bigger than your actual costs, you don't get a check for the difference.
• It generally can't count toward the cash reserves some loans require you to have left over after closing.

How Much Can a Seller Contribute?

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This is set by your loan program, not by the seller or the agents. The programs also don't all count the same things toward their limits, which is one more reason the details matter. These are the general limits under current program guidelines:

• Conventional loans (Fannie Mae and Freddie Mac): On a home you'll live in or a second home, the limit depends on your down payment. It's 3% if you're putting down less than 10%, 6% with 10% to 25% down, and 9% with more than 25% down. Investment properties are limited to 2%. The percentage is measured against the lower of the sales price or the appraised value. It covers closing costs and prepaid items together, and Fannie Mae also allows up to 12 months of HOA dues to be included.
• FHA loans: Up to 6% of the sales price, toward the buyer's closing costs, prepaid items, and discount points.
• VA loans: VA has its own seller-concession rules, and they don't treat every seller-paid item the same way. Some costs a seller pays on a VA buyer's behalf count toward VA's concession limit, and others don't. Your lender is the one who confirms which is which for your loan. One point VA has stated directly: a seller paying the buyer's agent is not treated as a seller concession.
• USDA loans: Seller contributions toward the buyer's closing costs and prepaid items are limited to 6% of the sales price. USDA's guidelines don't count money the seller pays toward the buyer's real estate commission, or seller funds for repairs, against that 6%. Repair funds have to be held in escrow. Seller money also can't be used to pay off a buyer's personal debts.

Fannie Mae publishes its limits in its Selling Guide, under Interested Party Contributions. The other programs have their own guidelines. These limits are the program maximums. An individual lender can apply stricter rules of its own, and program rules do change, so your lender confirms the exact number for your loan. That's one more reason I want buyers talking to a lender early.

Cash buyers aren't subject to these program limits, but they still have to negotiate. And if you're buying new construction, builder-paid closing costs count toward the same limits. I cover how those packages work in New Construction Builder Incentives in Louisville.

Asking for More Than Your Costs Doesn't Help

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This is one of the most common missteps I see. A buyer asks for a round number, say $10,000, when their actual closing costs and prepaids come to $7,500. The extra $2,500 generally can't be paid out to the buyer as cash. In most cases the unused part of the credit simply goes unused. If the parties want to put that value somewhere else, such as an adjustment to the price, both buyer and seller have to agree, the change has to be documented in the contract, and the lender has to approve it before closing. Meanwhile, the bigger request made the offer look weaker to the seller for no benefit.

The better approach is to start with your lender's Loan Estimate, see what your costs and prepaids actually are, and ask for a number that fits. I like to have those figures in hand before we write the offer. That keeps us from guessing in either direction.

The "Raise the Price, Get the Credit Back" Approach and the Appraisal

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One common way to structure a request is to offer a higher price and ask the seller to credit some of it back toward your costs. The seller ends up with roughly the same net amount. The buyer brings less cash to closing, because the costs are effectively being financed into the loan.

It can work well, but it comes with real limits:

• The appraisal has to support the higher price. The appraisal is one of the stages I walk through in what happens between going under contract and closing. If the appraisal comes in below the contract price, you may need to bring more money, renegotiate, or rely on whatever the contract says about a low appraisal.
• The credit still has to fit the loan's limits. A higher price doesn't raise the cap enough to cover an oversized credit. Where the limit is based on the lower of price or appraised value, a short appraisal can shrink it.
• You'll be paying for it longer. A higher price usually means a larger mortgage balance and a higher monthly payment for as long as you have the loan.

Whether you're better off with a lower price or a seller credit depends on your cash, your monthly payment, and how long you'll own the home. It's a real tradeoff, and it deserves more room than I can give it here.

When Asking Helps, and When It Hurts

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A seller doesn't really look at the price on an offer. A seller looks at what they'll walk away with, which is why I spend time with sellers on the closing costs they'll pay. To a seller, a $5,000 credit is $5,000 less in their pocket, the same as $5,000 off the price.

So the question is how much leverage you have on this particular house. Some things I pay attention to:

• How much competition there is. When a seller is comparing several offers, they compare every term side by side, not just price. I explain how sellers weigh those terms in How Do Multiple Offers Really Work? A concession request that's perfectly reasonable on its own can make an offer look weaker next to a cleaner one.
• How long the home has been on the market. A home that's been sitting, or has already had a price reduction, usually has a seller who's more open to helping with costs.
• The broader market. In a market that leans toward buyers, concessions are a normal part of the conversation. In a market that leans toward sellers, they're harder to get. Louisville doesn't always behave like the national headlines, so it's worth understanding whether Louisville is a buyer's market or a seller's market right now before you decide how hard to push.
• How the request is presented. A specific, supported request ("Seller to pay $6,200 toward buyer's closing costs and prepaids") comes across very differently from an arbitrary round number. Sellers respond better when the ask looks like it came from real numbers, because it did.

What About After the Inspection?

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The inspection is the other point where buyers commonly ask the seller to pay for something. If the inspection turns up issues, the buyer can usually ask for repairs, a price reduction, or a credit at closing.

One wrinkle: many lenders won't allow a credit that's labeled as being "for repairs." In practice, an inspection credit is usually written as a credit toward the buyer's closing costs, which means it's subject to the same loan-program limits and can't exceed your actual costs. If the credit you'd need is larger than that, a price reduction or seller-completed repairs may be the better structure. Inspection negotiations also run on contract deadlines, which is part of how to protect your home purchase between contract and closing.

Frequently Asked Questions

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Bottom Line

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A seller can help with more than most buyers realize: closing costs, prepaid items, points, title insurance, a home warranty, and often your agent's fee. The limits are real, though. The money can't go toward your down payment, it can't become cash back, and your loan program caps how much the seller can put in. Within those limits, the most effective request is one that fits your actual numbers and fits the home you're making an offer on. When the request comes from evidence rather than wishful thinking, the conversation with the seller tends to go much better.