Texas Buyer Closing-Cost Guide
Can the Seller Pay My Closing Costs in Texas?
Yes. Under current Texas TREC Form 20-19, effective July 1, 2026, a buyer and seller can negotiate a contribution toward eligible buyer expenses. The contract amount is only the first ceiling. The usable credit also depends on the loan program, occupancy, loan-to-value ratio, appraisal, lender approval, and the buyer’s actual eligible costs. It cannot become cash back to the buyer.
Quick answer, current August 27, 2026: Paragraph 12A(1)(b) of the current TREC One to Four Family Residential Contract lets the parties write a dollar amount that the seller will pay toward buyer expenses. That contract amount does not override underwriting. In practice, the usable contribution is the lowest of the negotiated credit, the applicable loan-program limit, the buyer’s actual eligible costs, and the amount the lender and settlement team approve. Paragraph 12B separately addresses buyer-broker compensation, so do not combine it with the expense credit when comparing offers.
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Kaitlin can coordinate an offer comparison with your lender and show the credit, price, payment, and cash-to-close side by side.
Where does the seller credit go in a Texas contract?
The current TREC One to Four Family Residential Contract, Form 20-19, became effective July 1, 2026. Paragraph 12A assigns certain buyer expenses to the buyer and includes a blank in Paragraph 12A(1)(b) for a seller-paid dollar amount toward buyer expenses. The form expressly says that amount excludes brokerage fees and compensation addressed in Paragraph 12B (TREC One to Four Family Residential Contract) (Texas Real Estate Commission, 2026).
That separation is important. A buyer may negotiate help with eligible loan and settlement expenses, and the contract may separately address any seller payment toward the buyer’s broker. They are different obligations, entered in different places, with different underwriting questions. Treating them as one lump sum can create a bad net sheet, a lender surprise, or both.
| Contract item | What it addresses | What it does not decide |
|---|---|---|
| Paragraph 12A(1)(b) | Negotiated seller dollar amount toward eligible buyer expenses | Whether every requested expense is allowed by the buyer’s loan |
| Paragraph 12B | Buyer-broker compensation, when negotiated in the contract | The buyer’s loan closing-cost limit or actual settlement charges |
| Paragraph 12C | The contract’s order for applying amounts when limits affect payment | Permission to give the buyer unused money after closing |
The contract is also not a loan approval. A conventional, FHA, VA, or USDA lender still has to classify the payment, confirm the permitted amount, review the appraisal, and match the contribution to actual eligible costs. The title or settlement company must then show the final treatment on the Closing Disclosure.
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Have the lender review the proposed language before the offer is signed, especially when the request includes discount points, a temporary buydown, HOA items, or buyer-broker compensation. Send Kaitlin your lender’s cost worksheet or call to compare the offer terms.
Contract checkpoint: Do not sign until Paragraph 12A shows the buyer-expense amount, Paragraph 12B separately shows any buyer-broker compensation, and the lender has reviewed both entries.
What determines how much seller credit I can actually use?
There is no single seller-concession percentage for every Texas buyer. The word “Texas” tells you which contract and state transaction rules are relevant. It does not identify the mortgage program or the underwriting limit. The useful number has to survive four separate ceilings.
- The negotiated contract amount. The seller is not required to pay more than the signed agreement provides.
- The loan-program ceiling. The rule may depend on program, occupancy, LTV, sales price, or the lower of price and appraised value.
- The actual eligible cost ceiling. A large percentage does not create a right to unused cash. The contribution must be absorbed by permitted charges.
- The file-specific approval ceiling. The lender, appraiser, and settlement team must accept the structure, documentation, value, and final allocation.
For example, imagine a $500,000 purchase contract with a negotiated $15,000 seller contribution. If the buyer’s loan program permits that amount but the final eligible buyer expenses total only $10,800, the buyer generally cannot take the remaining $4,200 as cash. The parties may be able to amend the credit, use a lender-approved eligible expense, or renegotiate another term before the applicable deadlines. The exact remedy must be approved for that transaction.
The four-ceiling test is why buyers should not choose a credit by percentage alone. The lender should run a current Loan Estimate showing expected lender charges, title and settlement charges, prepaid interest, escrows, insurance, taxes, permitted points, and any approved buydown. A seller should review the same request on a net sheet rather than assume the entire figure will be used.
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Decision threshold: Use the lowest of four numbers: the signed contract credit, the program limit, actual eligible costs, and the lender-approved amount.
Which buyer expenses can a Texas seller pay?
Potentially eligible items often include lender and settlement charges, prepaid items, escrow funding, discount points, and approved buydown costs. “Often” is deliberate. The loan program and lender must classify the expense, and the final amount must appear correctly in the closing documents.
| Expense or adjustment | How it usually functions | What must be checked |
|---|---|---|
| Loan and settlement closing costs | Seller credit may offset eligible lender, appraisal, title, recording, survey, or settlement charges | Program eligibility, invoice, amount, lender approval, Closing Disclosure |
| Discount points or rate buydown | Seller funds may reduce the rate or payment when the lender approves the structure | Permanent versus temporary design, program cap, disclosures, breakeven, value |
| Prepaid items and escrows | May help cover prepaid interest, insurance, taxes, and reserve deposits | Actual amount, timing, program treatment, permitted months or reserves |
| Repairs | Seller may complete work or the parties may negotiate a lender-approved credit | Property condition, appraisal, loan rules, invoices, escrow restrictions, contract amendment |
| Price reduction | Lowers the contract price rather than directly paying a closing charge | Payment effect, appraisal, seller net, financing, buyer cash benefit |
| Lender credit | Comes from the lender, commonly in exchange for loan pricing | Rate and APR, lender disclosure, net cost over the expected holding period |
| Buyer-broker compensation | Separately negotiated under the current TREC contract | Paragraph 12B, buyer agreement, lender classification, settlement disclosure |
| Cash back | Unused credit cannot become a buyer windfall at closing | Reduce, reallocate, or amend only with lender and settlement approval |
Fannie Mae’s current guide says interested-party contributions cannot fund the borrower’s down payment, reserve requirements, or minimum contribution and cannot exceed actual closing costs. Freddie Mac likewise distinguishes financing concessions from impermissible cash-like or undisclosed contributions outside closing (Fannie Mae interested-party contributions) (Fannie Mae Selling Guide, August 5, 2026); (Freddie Mac Guide Section 5501.6) (Freddie Mac Guide, effective July 1, 2026).
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A repair credit is not automatically interchangeable with a general closing-cost contribution. A lender may require work before closing, restrict repair escrows, or treat a concession differently when it changes value. If an inspection uncovers a material issue, evaluate repair responsibility, price, credit, lender requirements, insurance, and termination rights within the contract deadlines. Ask Kaitlin to coordinate the contract and lender questions.
Classification checkpoint: Make the lender label each requested dollar as a closing cost, prepaid item, point, buydown, repair treatment, lender credit, price change, or buyer-broker payment before relying on it.
How do conventional, FHA, VA, and USDA seller-credit rules differ?
The headline percentages below are planning references, not permission to write the maximum into every offer. Each row uses a different definition or base. A lender must confirm the current rule and the buyer’s exact file before reliance.
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| Program | Current planning ceiling | Important qualification |
|---|---|---|
| Fannie Mae conventional, principal residence or second home | 3% above 90% LTV; 6% from 75.01% through 90% LTV; 9% at 75% LTV or below | Based on the lower of price or appraised value; actual eligible costs still cap use |
| Freddie Mac conventional, primary residence or second home | 3% above 90% LTV; 6% from 75.01% through 90% LTV; 9% at 75% LTV or below | Guide definitions, eligible costs, value, and disclosure requirements apply |
| Fannie Mae or Freddie Mac investment property | 2% | Program and transaction classification must be confirmed |
| FHA | Up to 6% of sales price | Actual permitted costs apply; excess can become an inducement and reduce adjusted value |
| VA | 4% for defined seller concessions | Only certain seller-paid cost types fall within that rule; VA expressly excludes discount points, and lender approval still controls |
| USDA Guaranteed | Up to 6% of sales price | Eligible loan costs only; current Guaranteed program guidance applies |
Conventional loans
Fannie Mae applies 3, 6, and 9 percent tiers for a principal residence or second home based on LTV, and a 2 percent limit for investment properties. Its calculation uses the lower of the sales price or appraised value. A temporary or permanent interest-rate buydown funded by an interested party counts in the contribution calculation. Any amount above actual permitted closing costs cannot be used as cash, reserves, or down payment (Fannie Mae Selling Guide B3-4.1-02) (Fannie Mae Selling Guide, August 5, 2026).
Freddie Mac’s current Section 5501.6 uses the same headline tiers for primary residences and second homes, plus 2 percent for investment property, while providing its own definitions and treatment of financing and sales concessions. Freddie also permits certain actual closing costs and up to 12 months of HOA dues within its guide conditions. Do not assume every lender applies agency rules without overlays (Freddie Mac Guide Section 5501.6) (Freddie Mac Guide, effective July 1, 2026).
FHA loans
The current FHA Single Family Housing Policy Handbook permits interested-party contributions up to 6 percent of the sales price toward origination fees, other closing costs, prepaid items, discount points, permanent or temporary buydowns, and the upfront mortgage insurance premium, subject to FHA requirements. The contribution cannot satisfy the minimum required investment. Amounts exceeding actual eligible costs or the 6 percent limit are inducements to purchase and reduce adjusted value for maximum mortgage calculations (FHA Handbook 4000.1, Update 18) (HUD, 2026).
VA loans
VA uses a narrower definition for the 4 percent seller-concession ceiling than many buyers expect. VA’s current buyer guidance says only some seller-paid cost types fall within that 4 percent rule and expressly says discount points are not subject to it. The page lists examples within the concession category, including payment of prepaid closing costs, the VA funding fee, buyer debt or judgments, and temporary buydown funds. The lender still determines which costs and amounts are permitted (VA Funding Fee and Loan Closing Costs) (U.S. Department of Veterans Affairs, 2026).
USDA Guaranteed loans
USDA Guaranteed loan guidance permits seller or other interested-party contributions up to 6 percent of the sales price toward eligible costs. The program may permit items such as reasonable customary closing costs and the upfront guarantee fee, but it does not turn the contribution into money for personal debt or unrestricted cash. USDA’s buyer real-estate commission treatment is distinct and should be confirmed with the lender rather than folded casually into the 6 percent statement (USDA Loan Origination FAQ) (USDA HB-1-3555 and Loan Origination FAQ, 2026).
Do not choose the percentage before choosing the loan.
Ask the lender for the exact program, occupancy, LTV, eligible-cost estimate, appraisal treatment, and seller-contribution ceiling for your file.
Program checkpoint: Conventional tiers may be 3, 6, or 9 percent by LTV, investment property is generally 2 percent, FHA and USDA Guaranteed use 6 percent frameworks, and only certain seller-paid cost types fall within VA’s 4 percent concession category.
Is a seller credit better than a price reduction?
The better choice depends on the buyer’s constraint. A price reduction, closing-cost credit, discount-point payment, temporary buydown, lender credit, and repair concession move money in different ways. The best structure is the one that solves the real problem within program rules and still produces an offer the seller can accept.
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| Strategy | Potential buyer benefit | Tradeoff to model |
|---|---|---|
| Seller-paid closing costs | Can reduce cash needed at closing dollar for dollar up to eligible costs | Seller net, program ceiling, appraisal, unused-credit risk |
| Lower purchase price | Reduces the financed base and may improve value position | Monthly-payment change may be smaller than the immediate cash benefit of a credit |
| Permanent discount points | May reduce the rate for the life of the loan | Upfront cost, breakeven period, contribution cap, refinance or sale horizon |
| Temporary buydown | Can reduce the payment for an initial period | Payment later rises to the note rate; qualification and funding rules apply |
| Lender credit | Can reduce cash-to-close without asking the seller | May come with a higher rate or different loan pricing |
| Repair or condition adjustment | Can address a known property cost or risk | Lender, appraisal, insurance, timing, contractor, and escrow requirements |
Suppose a buyer has adequate income for the payment but needs to preserve cash for moving, reserves, or immediate ownership costs. A properly sized seller contribution may solve more than a similar price cut. If the buyer’s concern is long-term payment and the closing cash is already comfortable, a price reduction or lender-quoted permanent buydown may deserve more weight. There is no responsible answer without current quotes.
Compare at least three figures for each option: cash to close, monthly principal and interest, and total cost over the buyer’s likely holding period. Also show the seller’s estimated net. This turns “give me a credit” into an explainable negotiation.
If the seller’s offer is specifically a rate incentive, use Kaitlin’s separate seller rate buydown versus lower-price guide to compare the payment path and breakeven before deciding how to allocate the contribution.
Mortgage, tax, and legal advice must come from the appropriate licensed professionals. Kaitlin’s role is to help structure the real-estate negotiation, keep the transaction evidence organized, and coordinate the questions. Build your buyer strategy or call 214.429.4907.
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Comparison checkpoint: Put cash to close, monthly payment, likely holding-period cost, appraisal exposure, and seller net on the same worksheet before selecting the credit or price strategy.
Can I raise the price so the seller can fund the credit?
The parties can negotiate price and concessions, but a higher contract price does not guarantee that the property will appraise at that amount or that the lender will approve the contribution. Agency and government-loan guidance requires the appraiser and lender to consider sales or financing concessions when analyzing value.
Fannie Mae says sales concessions that exceed its financing-concession limits are treated as sales concessions and deducted from the sales price for LTV calculations. FHA treats excess contributions as inducements to purchase that reduce adjusted value. Freddie Mac likewise requires proper treatment and disclosure of financing and sales concessions. The exact result depends on the loan and the appraisal, not on a promise in the offer.
A buyer should therefore ask two separate questions:
- Will the loan program permit the contribution if the property supports the contract price?
- What happens under the contract if the appraisal does not support that price?
The contract, financing addendum, appraisal addendum if used, lender requirements, and available buyer funds must work together. A real-estate agent should not promise that an appraisal “will come in.” Ask Kaitlin to map the appraisal branch before you sign, review Kaitlin’s buyer process, or call 214.429.4907.
Appraisal checkpoint: Treat the loan-program limit and the appraised-value support as two separate pass-or-fail tests.
What happens if the seller credit is larger than my eligible costs?
An oversized credit is not a bonus check. If the buyer cannot use the full amount for approved costs, the unused portion normally remains with the seller unless the parties timely amend another contract term and the lender, settlement team, and applicable rules approve the change.
Possible transaction-specific responses can include reducing the contribution, applying part of it to other documented eligible costs, purchasing lender-approved discount points, funding a permitted buydown, or renegotiating price. None should be assumed after the fact. Some choices affect qualification, disclosures, appraisal treatment, or the waiting period before closing.
The CFPB’s Closing Disclosure rules require lender credits to appear separately and seller-paid amounts to be shown in the relevant transaction and cost sections. The creditor generally must provide the Closing Disclosure at least three business days before consummation, giving the buyer an important verification window (CFPB Regulation Z, 12 CFR 1026.19(f)(1)(ii); Closing Disclosure content under 12 CFR 1026.38) (CFPB, 12 CFR Sections 1026.19 and 1026.38).
Compare the final Closing Disclosure to the signed contract, amendments, lender worksheet, title charges, and invoices. Ask about differences immediately. Call Kaitlin before accepting a last-minute credit change or reserve a transaction review.
Disclosure checkpoint: Reconcile the contract credit, every seller-paid line, any lender credit, and the final cash-to-close figure during the three-business-day review window.
How should a Texas buyer negotiate and verify seller-paid costs?
- Get the lender’s file-specific ceiling. Confirm loan program, occupancy, LTV, property type, current rule, overlays, and which expenses qualify.
- Request an itemized Loan Estimate. Separate lender charges, title and settlement, prepaids, escrows, points, buydown funds, lender credits, and buyer-broker obligations.
- Size the request to a real objective. Decide whether the priority is cash to close, payment, repairs, price, or reserves after closing.
- Write the correct contract terms. Keep the Paragraph 12A buyer-expense contribution separate from Paragraph 12B buyer-broker compensation.
- Model seller net and competition. A strong request still needs to fit the property’s condition, market position, and competing offers.
- Plan the appraisal branch. Do not assume a price increase used to fund the credit will be supported.
- Refresh estimates during the option period. Inspection issues, insurance, loan changes, rate locks, or title facts may change the best allocation.
- Review the Closing Disclosure. Verify the credit, seller-paid items, lender credit, points, prepaids, cash to close, and any amendment before signing.
For the seller, the clean comparison is net proceeds plus risk. Compare price, seller-paid buyer expenses, any buyer-broker compensation, option terms, financing, appraisal protection, requested repairs, closing date, possession, and the buyer’s approval strength. A higher nominal price with a large contribution may net less or carry more appraisal exposure than a lower, cleaner offer.
Kaitlin’s goal is to give both sides a decision they can explain. Mortgage rules and contract forms change, so verify the current source, the lender’s current interpretation, and the final disclosure instead of recycling a percentage from an old social post. Start with Kaitlin’s buyer guidance.
Pick a convenient time to connect
Make the credit solve the right problem.
Bring Kaitlin your Loan Estimate, target cash-to-close number, property, and expected offer terms. She will help coordinate the contract strategy with your lender.
Offer-ready result: The lender has confirmed the program ceiling, the Loan Estimate supports the requested amount, Paragraphs 12A and 12B are separated, the seller net is known, and the appraisal branch is documented.
Frequently asked questions
Can a seller pay all of my closing costs in Texas?
A seller can pay all eligible buyer closing costs only when the negotiated credit, loan-program ceiling, actual eligible charges, appraisal, and lender approval all allow it. Any down payment, reserve requirement, or ineligible amount remains the buyer’s responsibility.
What is the maximum seller contribution in Texas?
Texas does not have one universal percentage for every mortgage. Conventional limits can depend on occupancy and LTV, FHA and USDA Guaranteed commonly use a 6 percent framework, and VA uses a 4 percent ceiling for its narrower definition of seller concessions. Actual eligible costs can create a lower ceiling.
Can I receive unused seller credit as cash back?
Call the North Dallas team: 214.429.4907
No. An unused seller credit cannot become unrestricted buyer cash. Before closing, the parties may consider a lender-approved reallocation or contract amendment, but the lender and settlement team must approve the final treatment.
Can seller credit pay discount points or a rate buydown?
Often, yes, if the loan program and lender permit it. Discount points and temporary or permanent buydowns may count toward the applicable contribution limit, and the buyer should compare the cost, payment effect, breakeven, and expected holding period.
Is seller-paid buyer-agent compensation the same as closing-cost credit?
No. The current TREC Form 20-19 places the seller’s contribution toward buyer expenses in Paragraph 12A and separately addresses buyer-broker compensation in Paragraph 12B. The buyer’s lender and settlement team must still confirm the financial treatment.
Is a closing-cost credit better than lowering the price?
A credit may reduce cash to close more directly, while a lower price reduces the purchase amount and may improve the value position. Compare cash to close, monthly payment, long-term cost, appraisal exposure, and seller net using current lender quotes.
Can the price be raised to cover a seller credit?
The parties can negotiate price and credit together, but the property must still support the value and the lender must approve the contribution. A higher price does not guarantee a matching appraisal.
When should I ask my lender to review the seller contribution?
Ask before submitting the offer, again after any loan, price, repair, or credit change, and when reviewing the Closing Disclosure. Early review reduces the risk of an unusable credit or a last-minute cash-to-close surprise.
Primary sources and research date
Research for this guide was source-locked August 27, 2026. Always confirm the current contract form and loan guidance for the specific transaction.
Ask a final question at 214.429.4907
- Texas Real Estate Commission, One to Four Family Residential Contract, Form 20-19
- Fannie Mae Selling Guide B3-4.1-02, Interested Party Contributions
- Freddie Mac Single-Family Seller/Servicer Guide, Section 5501.6
- HUD FHA Single Family Housing Policy Handbook 4000.1, Update 18
- U.S. Department of Veterans Affairs, Funding Fee and Loan Closing Costs
- USDA Guaranteed Loan Origination FAQ
- Consumer Financial Protection Bureau, Regulation Z Section 1026.38
About Kaitlin Lovern
Kaitlin Lovern is a North Texas real estate agent with Real Brokerage LLC. Ranked in the top 1% of REALTORS nationwide and RealTrends Verified, she helps buyers and sellers make evidence-based decisions across Frisco, Prosper, Celina, Plano, and surrounding Dallas-area communities.
Texas real estate license #0634293 | 214.429.4907 | Contact Kaitlin
