The Quick Read: Yes, a seller can usually cover part of your closing costs on a hard money purchase if the lender’s guidelines allow it, the contract spells it out, and the property’s value supports the price. No national cap exists, because hard money lenders are private and each one sets its own limit. Ask the lender for its limit before you write the offer.
- The limit comes from the lender’s guidelines, not from an agency rulebook.
- The credit must be written into the purchase contract and appear on the settlement statement.
- It can offset your closing costs. It cannot replace your down payment, fund reserves, or hand you cash back.
- A lender may treat a large credit as a price reduction, which can shrink the loan.
- Raising the price to fund a credit only works if the appraisal or broker price opinion backs the higher price.
Who Sets the Limit on a Hard Money Purchase?
The lender sets it. A hard money loan is private, asset-based financing, so there is no published seller-credit cap to look up. Each lender decides how much credit it will accept, which costs the credit can cover, and how the credit changes the loan amount.
What this loan actually costs to carry.
Hard money is sized against the project and priced by time. Enter the deal and see how much the program will lend, the cash required at closing, the carry while you hold it, and what is left at the exit.
Leverage tiers on the current program: 85% with fewer than 2, 90% with 2 or more, 93% with 5 or more completed projects — every tier capped at 75% of after-repair value. Loan amounts up to $5,000,000, larger by exception; terms of 6 to 18 months, interest-only, no prepayment penalty. The rehab portion funds in draws against completed work, not at closing.
Program parameters shown update from Lendmire’s centralized guideline source. Rate, points, and months are editable assumptions, not quoted terms.
Cost cap sets the loan · positive spread
Illustrative estimate only — not a quote, Loan Estimate, approval, or commitment to lend. Rate, points, and months are editable assumptions. Hard money is business-purpose financing for real estate investors, not a consumer mortgage. Leverage on the current program tops out at 93% of project cost for investors with a documented track record, capped at 75% of after-repair value, with rehab funding up to 100% of the documented budget released in draws; actual terms vary by lender, borrower experience, property, and exit. Lendmire is a mortgage broker, not a lender.
Three things control what you can actually do:
1. The lender’s guidelines. These set a maximum credit and say which costs it may pay.
2. The valuation. The appraisal or broker price opinion (BPO) must support the contract price.
3. The purchase contract. The credit has to be written there, or the title company will not put it on the settlement statement.
Lendmire is a broker, so it does not set these limits. It places hard money files with lenders in its wholesale network, and those lenders differ. Some accept a modest credit without comment. Others want to see the contract first. A few treat nearly any credit as a price cut. That is why the first call goes to the lender, before you negotiate with the seller.
How a Seller Credit Works, Step by Step
A seller credit is a line item, not a check. The seller agrees to reduce their net proceeds at closing, and the buyer’s cash to close goes down by the same amount. Here is how it moves through a deal.
Step 1: Put it in the contract. The purchase agreement states the credit, either as a flat amount or as a share of the buyer’s closing costs. The title company follows the contract, so vague language causes problems later.
Step 2: Get the lender’s review. The lender compares the credit with its own policy. Send the signed contract early, because a credit the lender rejects can force a renegotiation.
Step 3: Confirm the value. Hard money lenders typically order a BPO or an appraisal. A BPO is a quick opinion of value from a local agent. The value must support the price, with or without the credit.
Step 4: See how the loan is sized. Many hard money lenders size the loan on loan-to-cost or loan-to-value. A credit lowers what you effectively paid, so the lender may use the lower figure. In that case, the loan shrinks and you gain less cash than the credit’s face amount. Treat that as a common lender approach, not a universal rule.
Step 5: Check the settlement statement. The credit shows as a charge to the seller and a credit to the buyer. Business-purpose loans are not locked into the consumer mortgage forms, so the layout depends on the lender and the title company. Review the draft early and make sure the numbers match your contract.
Credit or Price Cut: Which Is Better for You?
A credit and a price reduction are not the same thing. Here is how they compare for an investor.
A price reduction lowers your purchase price and your cost basis. The loan, the equity you carry, and your eventual profit all reflect the lower number. It is clean and easy to document.
A seller credit leaves the price where it is and shifts cash at closing. It helps if you are short on cash to close. It also keeps the recorded price higher, which can matter to the seller’s other buyers or to their own numbers.
The tricky version is the inflated price. Say you want a larger credit than the seller will give from the current price. You offer a higher price, and the seller credits the difference back. This can work, but it carries two risks. The appraisal or BPO may come in below the inflated price, which blows up the deal. And if it does support the price, you carry a larger loan and a higher basis for the same property.
For a flip, the higher basis cuts into profit. For a rental, it can weaken the coverage ratio on a later refinance. Lenders also notice the pattern. If the contract shows a price well above the neighborhood evidence and a matching credit, expect questions.
What a Seller Credit Can and Cannot Pay For
A credit generally covers the buyer’s closing costs and not much else. Costs on a hard money purchase typically include the appraisal or BPO, title and escrow, application and document fees, inspection, and lender fees. Whether a given lender lets the credit touch its own fees varies.
| Cost bucket | Can a credit cover it? | Typical catch |
|---|---|---|
| Title and escrow fees | Usually yes | Must fit the lender’s cap |
| Appraisal or BPO | Usually yes | Some lenders collect it up front |
| Lender fees | Varies by lender | Ask before you assume |
| Down payment or equity | No | The lender wants your own money in |
| Reserves | No | Reserves must be your funds |
| Rehab budget | No | Draws are a separate bucket |
| Cash back to you | No | Excess credit is usually lost |
Two rules sit under that table. First, a credit cannot exceed your actual closing costs, so a bigger credit than your costs is simply wasted. Second, the rehab budget is its own bucket. On a fix-and-flip, the lender funds the rehab budget in draws against completed work, and a seller credit does not turn that money into closing cash.
How Hard Money Differs From Agency-Style Rules
Agency mortgage rules set published caps. Hard money does not follow them. The contrast helps explain why you cannot simply look up the answer.
Fannie Mae’s Selling Guide caps seller and other interested-party contributions at 2% on an investment property. Those caps cover conventional agency loans only. A hard money loan is not an agency product, so that 2% figure does not apply to it, and it is not a hard money rule or a Lendmire figure.
| Factor | Agency-style loan | Hard money loan |
|---|---|---|
| Who sets the cap | A published guide | The individual lender |
| Sizing basis | Loan-to-value | Loan-to-cost or value |
| Excess credit | Treated as a price cut | Often treated that way |
| What to ask | Check the guide | Ask the lender directly |
One more point belongs here. Hard money loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage. The CFPB’s rule on exempt transactions explains that business-purpose credit sits outside the consumer mortgage framework, and that disclosures a lender gives out of caution do not change this. In practice, that means the consumer-loan seller-credit limits do not govern your deal. The lender’s own policy does.
What a Seller Credit Does to Your Deal
A credit reduces the cash you need at closing. That leaves more for rehab, reserves, or the next purchase. For a flipper working with limited capital, that can matter a great deal, because less cash in the deal also lifts cash-on-cash return.
Here is the leverage context. Across the network, hard money leverage depends on the loan type and your track record. Fix-and-flip loans run from 85% of project cost with fewer than two completed projects, to 90% of project cost at two or more, to 93% of project cost at five or more. Every tier is capped at 75% of after-repair value, which is the expected value after the work is finished. A bridge purchase without rehab goes up to 80% of purchase price. These figures vary by lender, property, and experience, and none of them is a commitment to lend.
Now picture how a credit interacts with that. Say a flip is under contract and the lender sizes the loan on cost. If the lender counts the credit as a price reduction, the cost basis falls. The loan falls with it. Your cash to close drops by less than the credit’s face amount. That is not a problem, but it is the reason to ask the lender how it counts the credit before you plan around it.
Profit math also changes if you inflate the price. The extra price is borrowed against, and you repay it. A credit funded that way is not free money.
Many investors refinance out of hard money once the property is stabilized. Lendmire brokers that path into long-term financing, which is covered in the complete DSCR loans guide. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. The refinance lender values the property on its own, so a high contract price from your purchase does not carry over.
Mistakes and Red Flags
Most problems come from the same few habits. Avoid them and the credit usually goes through cleanly.
- Assuming agency caps apply. They do not, so a figure you read online may be irrelevant to your lender.
- Skipping the lender call. A credit that is too large can be cut after you have already negotiated it.
- Side deals. Any credit or payment that is not in the contract and on the settlement statement is a problem. Disclose everything to the lender.
- Mislabeling repairs as closing credits. A repair credit and a closing-cost credit are treated differently. Label each honestly.
- Inflating the price past the evidence. An appraisal that comes in low can cost you the deal or force you to bring extra cash.
- Counting on the excess. Credit above your actual costs usually disappears. Do not plan to pocket it.
- Forgetting the seller’s view. Sellers rarely love giving credits. Your ask works better in a market where sellers need a deal to close.
The bigger red flag is any plan that puts less of your own money in the deal than the lender expects. Lenders in the network want to see you carry real exposure. A credit that quietly replaces your equity tends to get flagged.
If the Seller Says No
You still have options. None of them is free, but each can close part of the gap.
1. Ask for a price reduction instead. Some sellers prefer lowering the price to writing a credit. The loan and your basis both fall, which helps you.
2. Negotiate the lender’s fees. Fees vary by lender and file. Ask your broker to compare options.
3. Use cash reserves. If your cash is tight, shrink the rehab scope or pick a smaller project.
4. Ask about seller financing. In some deals a seller carry-back can sit behind the first-position lender, though the lender has to allow it.
5. Roll costs into the loan where allowed. Lendmire’s piece on whether hard money closing costs can be rolled in or paid by the seller covers that route: Can Hard Money Closing Costs Be Rolled In or Paid by the Seller?
Cash-out and rate/term refinances have no seller, so none of this applies there. Seller credits only exist on purchases.
Key Terms Defined
Seller credit: An agreement in the purchase contract that reduces the buyer’s cash to close and the seller’s net proceeds by the same amount.
Loan-to-cost: The loan amount as a share of the project’s total cost, including purchase price and rehab.
After-repair value (ARV): The property’s estimated value once the planned renovation is complete.
Broker price opinion (BPO): A local agent’s opinion of a property’s value, used by some lenders in place of a full appraisal.
Rehab draw: A payment from the lender, released against completed renovation work, that funds the repair budget.
Business-purpose loan: A loan made to buy or improve property for investment, not for the borrower to live in.
Frequently Asked Questions
Can the seller’s credit cover my down payment on a hard money loan?
No. Lenders want your own money in the deal, so the down payment and reserves must come from your funds. A credit can offset closing costs, which still lowers your total cash to close.
Can I raise the price to fund a bigger credit?
Sometimes, but it is risky. The appraisal or BPO has to support the higher price, or the deal can fall apart. You also end up with a larger loan and a higher basis, and some lenders treat the excess as a price reduction when they size the loan.
Does the lender have to approve the seller credit?
Yes, in practice. The lender reviews the contract and compares the credit with its own policy. Share the signed contract early so any problem shows up before closing.
Can a seller credit cover rehab costs?
Not through the rehab budget. Rehab money funds in draws against completed work, and it is a separate bucket from closing costs. If a seller wants to help with repairs, the lender expects it to be documented and labeled honestly.
Does this work for a flip and a rental the same way?
The mechanics match, but the stakes differ. On a flip, the credit lowers cash in the deal while the higher basis cuts into profit. On a rental you plan to refinance into DSCR financing, a lower basis and clean paperwork help the later refinance.
Next Step
If you are buying, rehabbing or refinancing an investment property on a short timeline and want to see how the numbers work, Lendmire can help you compare hard money options based on the project, the exit plan, leverage, and your goals. Lendmire arranges financing through select lenders in its wholesale network across 41 markets, including Washington, D.C. Terms vary by lender, property, and experience, and nothing here is a commitment to lend.
About Lendmire
As a non-QM mortgage broker (NMLS# 2371349), Lendmire facilitates DSCR investor loans across 41 markets, including Washington, D.C. DSCR eligibility is generally reviewed around property-level rental income instead of personal income documentation, subject to lender guidelines, serving LLC-structured portfolios and self-employed borrowers who don’t fit conventional boxes. A two-time Scotsman Guide Top Mortgage Workplace (2025, 2026).
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References
1. Fannie Mae Selling Guide B3-4.1-02, Interested Party Contributions
2. CFPB, Regulation Z §1026.3, Exempt Transactions
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Handle a Low ARV Appraisal on a Hard Money Construction Loan · How a Hard Money Lender Sizes a Blanket Loan Across Properties · Hard Money Loan Preapproval Documents Before You Make Offers
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.