The Quick Read: No universal cap exists for seller credits on a hard money purchase. Each lender sets its own limit in its term sheet, and the credit is tested against the lender’s cost and value math, not a standard percentage.
- The seller credit is negotiated in your purchase contract. The lender does not grant it.
- It can pay real closing costs. It cannot replace your required cash in the deal.
- An over-limit credit is usually treated as a price cut, so your loan shrinks and your cash goes up.
- Hard money leverage is measured against project cost and after-repair value, so a credit can change both numbers.
- Ask for the lender’s limit in writing before you write the offer.
What Counts as a Seller Concession?
A seller concession is money the seller gives you at closing to cover your costs. The settlement statement shows it as a credit to you, as Opendoor’s explainer on seller credits describes. You will also hear it called a seller credit, seller-paid costs, or an interested-party contribution.
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.
Lenders sort these credits into two buckets. A financing concession pays real costs: lender fees, title and escrow charges, and prepaid items. A sales concession is value handed over in some other form, or a credit above the allowed amount. Underwriters treat a sales concession as a price reduction.
That second bucket is where investors get hurt. A credit that looks like a favor can quietly become a smaller loan.
Who Sets the Limit on a Hard Money Loan?
The lender does. Hard money is private, asset-based lending, so no regulator or published standard hands you a cap. Across the lenders Lendmire works with, the limit lives in the program guidelines and in the lender’s discretion on the individual deal. Some term sheets state a percentage of price. Others say the credit must be reasonable and approved in advance.
Why does the limit differ from lender to lender? Because the approval rests on the property and the plan, not on your paycheck. The lender sizes the loan on cost and value. Anything that changes cost or value touches the loan.
Here is how hard money leverage typically works across the network. Every figure varies by lender, property, and experience, and nothing here is a commitment to lend.
| Loan type | Typical leverage | Ceiling |
|---|---|---|
| Fix-and-flip, 5+ completed projects | 93% of project cost | 75% of ARV |
| Fix-and-flip, 2+ completed projects | 90% of project cost | 75% of ARV |
| Fix-and-flip, fewer than 2 | 85% of project cost | 75% of ARV |
| Bridge purchase, no rehab | Up to 80% of purchase price | Value-based |
| Cash-out or rate/term refinance | Up to 65% of value | Value-based |
ARV means after-repair value, the lender’s estimate of what the property is worth once the work is done. Loan-to-cost means the loan is sized as a share of what the project costs, purchase plus rehab. Up to 100% of the rehab budget can fund in draws against completed work. That is a rehab-budget figure, not a purchase loan-to-value. There is no true 100% purchase program, whatever a headline claims.
The top tier is reserved for experienced investors. First-time investors generally qualify at the lower tiers, with a minimum score of 620 and added conditions below 660.
Every one of these numbers connects to your credit. If the credit shrinks the cost basis, the loan can shrink with it.
How Underwriting Treats the Credit, Step by Step
Hard money lenders do not publish this process, so the steps below blend how credits work in lending generally with how the file is built in practice. Your lender’s version may differ in the details.
1. You and the seller agree on the credit in the contract. It is a deal term between buyer and seller. The lender reviews it but did not create it.
2. The lender sizes the loan on the lower of price or value. A practitioner explainer on seller credits versus price reductions notes that lenders generally lend on the lesser of the contract price or the appraised value. On a hard money file, expect the lender to test the numbers against loan-to-cost and ARV as well.
3. The credit is tested against the lender’s limit. Anything over the limit gets trimmed. A credit you negotiated in good faith can shrink late in the file if nobody confirmed the limit first.
4. The excess is recharacterized as a price reduction. Leverage is then figured on the smaller basis. That means a smaller loan and more cash from you.
5. The credit is capped at your actual costs. If the credit is bigger than the costs it can legitimately pay, the unused part generally does not come back to you as cash, as iBuyer’s seller credit explainer points out.
6. All credits count toward one limit. Credits from the seller, builder, developer, and brokerage are generally added together against a single cap.
Steps two through four are the part to remember. The credit is not free money layered on top of your loan. It rearranges the loan’s inputs.
What the Credit Can and Cannot Pay For
A seller credit works for lender-side and title-side costs. It does not work as a substitute for your own money.
| Usually allowed | Usually not allowed |
|---|---|
| Lender and origination charges | Your required cash contribution |
| Title, escrow, and settlement fees | Reserves the lender requires |
| Prepaid items such as insurance | Cash back to you at closing |
| Recording and similar fees | Costs that do not exist |
Hard money lenders expect real money from the borrower. Many call it skin in the game. Think of it as the lender checking that you have something to lose besides the property. A credit that quietly funds your down payment defeats the purpose, so expect the lender to refuse it.
Your lender may treat some cells in that table differently. Treat the table as a starting list of questions, not a promise.
A Worked Flip: Before and After the Credit
Say you are buying a distressed duplex to rehab. You sit in the 90% of project cost tier because you have a couple of completed projects. The cap of 75% of ARV still applies on top.
Without any credit, you bring the gap between the loan and the total cost: the down payment plus closing costs. Now the seller agrees to a credit toward your closing costs, and the credit is within the lender’s limit and below your actual costs.
What changes? Your cash to close drops. Your loan amount does not change. Your down payment does not change. The credit simply lowers the check you write on closing day.
Now run the over-limit version. The seller offers a credit larger than the lender’s limit, or larger than your real costs. The excess is treated as a price cut. The lender recomputes the project cost on the smaller basis. Because the loan is sized as a share of cost, the loan shrinks, and you make up the difference.
That outcome is not a disaster if you saw it coming. It is a disaster when you find out late, with a rehab budget already committed.
The lesson: before you chase a larger credit, ask whether the extra buys you anything. A bigger headline credit is not automatically a better deal than a lower purchase price.
Where Agency Rules Fit
Conventional agency loans do have written limits, and that is why search results are full of percentage tables. They do not govern hard money. They are useful only as contrast.
Under the agency guide, Fannie Mae’s Selling Guide on interested-party contributions measures the limit on the lower of price or value. Over-limit amounts count as a sales concession and reduce the price, and leverage is recalculated. The contribution also cannot exceed the borrower’s actual closing costs. The same guide bars these contributions from funding the down payment, reserves, or the borrower’s minimum contribution, as its companion policy text confirms. REMAX’s seller concessions explainer reports a flat 2% limit for conventional investment properties.
Those are market-wide agency figures. They are not hard money limits, and they are not what the lenders in Lendmire’s network apply. For hard money, the numbers that matter are the loan-to-cost tiers and the ARV ceiling above, plus your lender’s own concession language.
The logic travels even where the numbers do not. Both worlds measure on cost or value. Both trim excess. Both want your own money in the deal.
Edge Cases Where the General Rule Breaks
The raise-the-price structure. Some investors offer a higher price and ask for a matching credit, so the loan funds the costs. It only works if the property appraises at the higher price. A lender who sees a price that looks inflated to create a credit will look hard at the file, and with leverage tied to cost and ARV, the appraisal controls the outcome.
A low appraisal. A price reduction closes a value gap directly. A credit does not, because the contract price has not moved. If you are worried about value, ask for the price cut.
Repair credits. A credit labeled as repairs often draws scrutiny. Underwriters tend to want repairs completed, not credited. On a rehab deal the structure already handles this: you front the work and are reimbursed through draws against completed work. Do not disguise closing-cost money as repair money. Describe the credit plainly as what it is.
Buyer-agent commissions. Some agency programs exclude customary seller-paid buyer-agent fees from the contribution cap. Treatment by hard money lenders varies, so ask rather than assume.
Builder credits. Anything from the builder, its affiliates, and its agents stacks against one limit. Add them up before you compare offers.
Overage. Investors sometimes report getting a check back after closing when a credit exceeded costs. Do not plan around that. The general rule is that unused credit does not turn into cash.
Cash-out and refinance files. There is no seller on a refinance, so seller credit rules do not apply. Cash-out and rate/term refinances run up to 65% of value on a hard money file.
Writing the Credit Into the Contract
Timing matters more than wording. Confirm the lender’s limit before you write the offer, not after the seller has said yes.
Here is a short list to ask the lender in writing:
- What is the maximum seller credit, and is it a percentage of price, of cost, or of value?
- Is the limit measured against price or appraised value?
- Which costs can the credit pay, and which are excluded?
- What happens if the credit exceeds the limit or my actual costs?
- Do builder, agent, and other third-party credits count toward the same limit?
- Will you review the contract language before it is signed?
Then describe the credit simply in the contract: a seller credit toward the buyer’s closing costs, with no disguised labels. The line should show up on the settlement statement exactly as written.
A broker habit worth borrowing: put the lender’s answer in the same folder as the contract. It is much easier to renegotiate before the seller signs than after.
Sellers often prefer a credit to a price cut because a credit protects the recorded sale price, as iBuyer’s explainer notes. Use that as a negotiating lever. Offer the credit structure the seller likes, sized to what the lender allows.
Key Terms Defined
Seller concession: Money the seller gives you at closing to cover your costs, negotiated in the purchase contract.
Financing concession: A credit that pays real closing costs and prepaid items.
Sales concession: Value above the lender’s limit or beyond your actual costs, treated as a price reduction.
Loan-to-cost: The loan sized as a share of what the project costs, purchase plus rehab.
ARV (after-repair value): The lender’s estimate of the property’s value once the planned work is finished.
Draw: A release of rehab funds after completed work is verified.
Skin in the game: Your own cash invested in the deal, which a credit cannot replace.
What the Investor Decision Looks Like
Start with the deal, not the credit. Ask what the credit actually buys you. If it lowers cash to close and stays inside the lender’s limit, it is a clean win. If it pushes past the limit, you have bought a smaller loan.
This one is a genuine toss-up on some deals. A lower price improves your project basis and your resale margin. A credit improves your cash on closing day. Flippers short on cash often favor the credit. Investors with strong cash positions and a long hold may prefer the price cut.
Remember the exit, too. Many investors refinance out of hard money into long-term DSCR financing once the property is stabilized, and Lendmire brokers that path. DSCR compares a rental’s income to its full monthly obligation: principal, interest, taxes, insurance, and association dues. Seller credits do not change that math, and clearing the ratio is not the same as positive cash flow. Your complete DSCR loans guide walks through the take-out side. Tax treatment varies; consult a qualified professional before relying on any deduction.
For the cost side of the same question, Lendmire’s piece Can Hard Money Closing Costs Be Rolled In or Paid by the Seller? covers the other options.
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 is a broker arranging financing through select lenders across 41 markets, including Washington, D.C.
Frequently Asked Questions
Can a seller pay my closing costs on a hard money loan?
Usually yes, up to the limit in the lender’s term sheet. The credit is negotiated in the contract and must fit inside the lender’s guidelines. Confirm the cap and the approved uses in writing before you make the offer, because lenders set these individually.
Is there a standard cap on seller concessions for hard money?
No. No published universal cap exists for private, asset-based lending. The percentage figures you see online mostly describe conventional agency loans. For hard money, your leverage tier, the loan-to-cost math, the 75% of ARV ceiling, and the lender’s own concession language decide the practical limit.
Can a seller credit cover my down payment?
No, not in any structure worth planning around. Agency rules bar it outright, and hard money lenders want your own cash in the deal. A credit can lower cash to close by paying real closing costs, but it cannot stand in for the equity you are required to bring.
What happens if the credit is bigger than my closing costs?
The excess is generally not paid to you as cash. It may be trimmed, or it may be treated as a price reduction that lowers the cost basis. On a hard money file, a smaller basis can mean a smaller loan and more cash needed from you.
Does a seller credit change my loan amount?
Not when it stays within the limit and pays real costs. It lowers your cash to close. When it exceeds the limit, it works like a price cut, and because hard money is sized on cost and value, the loan can shrink. Program details vary by lender, property, and experience.
About Lendmire
Lendmire is a non-QM mortgage brokerage (NMLS# 2371349) arranging DSCR investor loans in 41 markets, including Washington, D.C. DSCR eligibility is generally reviewed around property-level rental income rather than personal income, subject to lender and program guidelines, a fit for self-employed investors and LLC-owned portfolios. Lendmire was recognized as a Scotsman Guide Top Mortgage Workplace in 2025 and 2026.
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References
1. Opendoor’s explainer on seller credits
2. Practitioner explainer: seller credit or price reduction
3. iBuyer: What Is a Seller Credit
4. Fannie Mae Selling Guide: Interested Party Contributions
5. Fannie Mae policy text on contribution limits and down payment restrictions
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 a Hard Money Lender Limits Fix and Flip Property Types · Hard Money Maximum Loan Amount Requirements for a Flip · How ADU Builders Draw Funds on a Hard Money Construction Loan
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.