Are you hearing about seller concessions and wondering what they actually cover in Union County? You are not alone. With closing costs, prepaid expenses, and interest rates to juggle, the topic can feel like alphabet soup. The good news is that a clear strategy can lower your cash to close and keep your deal on track. In this guide, you will learn what concessions can pay for, how loan rules cap them, and how they fit into New Jersey’s attorney-led closings. Let’s dive in.
What are seller concessions?
Seller concessions are funds or credits a seller provides to help you pay closing costs, prepaid items, or a mortgage rate buydown. They show up in your purchase contract and on your closing statement, and they reduce your out-of-pocket cash at closing.
Concessions are not the same as a price reduction. A price cut lowers the purchase price. A concession is a separate credit paid by the seller to cover specific allowable costs.
Buyers like concessions because they improve affordability. Sellers use them to make an offer more attractive or to solve for buyer cash limits while keeping the contract price competitive.
What concessions can cover
In most loan programs, concessions can be applied to:
- Buyer closing costs such as lender origination, title charges, recording, and settlement fees.
- Prepaid items like property taxes, homeowners insurance premiums, and per diem interest.
- Discount points or a rate buydown, including temporary options like a 2-1 buydown, if the lender allows it.
- Certain lender-required items at closing, such as repairs noted by the lender, or HOA transfer related fees, when permitted.
- In limited cases, a portion of the buyer’s real estate brokerage fee if agreed in the contract and allowed by the lender.
Lenders will itemize these on your Loan Estimate and Closing Disclosure so the credit is applied correctly.
What concessions cannot cover
There are clear guardrails on concessions:
- They cannot cover your required minimum down payment.
- They cannot pay for items excluded by your loan program or by law.
- They cannot be used for post-closing obligations unless the lender permits and documents them in closing instructions.
Always confirm permitted uses with your loan officer before you write or accept an offer.
Loan program limits at a glance
Concessions are capped to protect borrower equity and loan collateral. Typical limits include:
- FHA: Up to 6% of the purchase price toward closing costs, prepaid items, and discount points.
- VA: Generally up to 4% in concessions, with additional rules on what counts as a concession versus standard closing costs.
- USDA: Up to 6% for allowable costs and points. Union County has areas that are ineligible for USDA purchase loans, so verify property eligibility early.
- Conventional (Fannie Mae/Freddie Mac): Caps depend on down payment.
- Down payment less than 10%: typically 3% cap.
- Down payment 10% to less than 25%: typically 6% cap.
- Down payment 25% or more: typically 9% cap.
- Jumbo/Portfolio: Set by the specific lender. Limits are often lower and vary case by case.
Lender overlays and investor updates can modify these caps, so you should always check with your lender before finalizing terms.
Union County closing basics
New Jersey closings are attorney-driven. Both buyer and seller are commonly represented, and your attorney coordinates with the title company and lender to prepare closing figures.
Sellers in New Jersey typically pay the state Realty Transfer Fee and must deliver clear title. Buyers typically pay lender fees and many recording or title related charges. Municipal requirements differ town by town, and some Union County municipalities require specific certificates or inspections before transfer.
Concession credits are usually shown on the Closing Disclosure or settlement statement and disbursed by the title company or closing attorney at funding.
How concessions affect your numbers
A concession lowers your cash to close, but it reduces the seller’s net proceeds by the same amount. Think of it as part of the total deal math.
Net proceeds to the seller are the sale price minus the mortgage payoff, minus seller side closing costs, minus transfer taxes and fees, minus any concessions. The credit can be applied as a lump sum on the closing statement or used to pay specific bills at closing, with the same bottom-line effect.
Some buyers and sellers combine a price adjustment with a concession, such as increasing the price slightly and adding a credit so the buyer can finance more of the overall cost. This structure must still pass appraisal and underwriting review.
Rate buydowns using concessions
You can use a seller concession to buy discount points for a permanent rate reduction or to fund a temporary buydown like a 2-1 buydown. The lender will calculate the cost and place funds in escrow if needed.
Important notes:
- The cost of the buydown counts toward the program’s concession cap.
- The loan program and investor must allow the buydown.
- Documentation must show the source of funds and how they are applied.
If monthly payment is your top priority, discuss a buydown quote with your lender before you finalize your offer terms.
Price vs. credit strategy
There are three common structures when you negotiate:
- Lower price with no concession.
- Higher price with a concession that covers closing costs or a rate buydown.
- Mid-range price plus a smaller concession.
Each option affects appraisal, your loan qualification, and the seller’s net differently. If you raise the price to create room for a credit, the appraiser still needs to support that higher price with comparable sales. If the appraisal comes in short, you must renegotiate or bring cash to cover the gap.
Appraisal and underwriting considerations
Appraisers review concessions when analyzing comparable sales. If a comparable had an unusually large credit, the appraiser may adjust for it. Underwriters also look closely at big credits to confirm the market value is supported and the borrower meets equity requirements.
Be sure the concession is clearly written in the contract and shared with the lender early. For buydowns, expect the underwriter to require proof of the buydown escrows or paid points.
Clear contract language
Your attorney can help you write precise language. A common format is:
“Seller agrees to contribute $X toward Buyer’s closing costs, prepaid items, and discount points, subject to lender and investor limits and acceptance.”
If you are using a buydown, specify the type, total dollar amount the seller will provide, and how funds will be held or applied at closing. You can also tie the concession to loan approval and appraisal, to protect both sides if circumstances change.
Union County practical tips
Union County towns vary in municipal requirements and property tax timing. If you are closing mid year, taxes are prorated. Buyers sometimes prefer to use part of the concession to offset prepaid tax escrows. Build in time to obtain any required certificates or fire safety sign offs your town needs.
Because New Jersey closings are attorney led, it helps to loop in your attorney and title company as soon as an offer with a credit is accepted. They will coordinate the Closing Disclosure so the credit is applied to the right line items.
Step by step: using concessions well
Follow this simple process to keep your transaction smooth:
- Get preapproved and tell your lender early if you need a seller credit. Ask for permitted uses and caps for your loan type.
- Pick a negotiation structure. Compare monthly payment and cash-to-close with and without a credit or buydown.
- Estimate the seller’s net. Sellers should factor the state transfer fee, standard closing costs, and the proposed credit before accepting terms.
- Write clear contract language. Reference program limits and, for buydowns, the total and method of funding.
- Watch the appraisal. Confirm your price is supportable with recent comparable sales.
- Verify the Closing Disclosure. Make sure the credit appears on the correct lines and does not exceed program limits.
Common scenarios in Union County
- First-time buyer with limited cash: A modest credit to cover title and lender fees can make the difference, within program caps.
- VA buyer: The structure must respect VA limits and definitions of concessions versus standard costs. Coordinate early with your loan officer.
- Move-up buyer targeting payment: A seller funded buydown can lower the payment in the first years or permanently with discount points.
- Seller with multiple offers: A slightly lower price with no credit may net the same as a higher price with a credit. Review both options before deciding.
The bottom line
Seller concessions are a flexible tool in Union County when you use them within program rules and New Jersey closing practices. Whether your goal is to reduce cash to close or improve your monthly payment, the right structure depends on your loan type, appraisal support, and local norms. The key is to decide early, stay within caps, and write clean, specific contract terms.
If you want help comparing price and credit scenarios or preparing your sale to net well with credits, reach out to MaryBeth Tomaro for a friendly, local strategy session.
FAQs
What can seller concessions cover in Union County, NJ?
- They can cover buyer closing costs, prepaid taxes and insurance, and discount points or buydowns when allowed by the lender and within program caps.
How much can a seller pay under FHA rules?
- FHA typically allows up to 6 percent of the purchase price toward eligible buyer costs, not including the buyer’s required down payment.
Do concessions affect the appraisal on a home purchase?
- They can. Appraisers and underwriters review large credits and may adjust comparable sales or ask for support if concessions appear high for the market.
Can the seller pay my down payment in New Jersey?
- Generally no. Most loan programs prohibit seller paid down payments. Buyers must bring the required minimum down payment from acceptable sources.
Are USDA loans available in Union County?
- USDA sets eligibility maps, and Union County has areas that are not eligible. Confirm property eligibility with your lender early in the process.
Who applies the credit at closing in New Jersey?
- The title company or closing attorney applies the seller credit on the Closing Disclosure and disburses it at funding as permitted costs are paid.
Can concessions cover a buyer’s agent commission?
- In some cases a seller may agree to pay a portion of the buyer’s brokerage fee, but it must be allowed by the lender and written into the contract.
